Miscellaneous
Starting Oct. 1, the federal government plans to start gradually reducing subsidies for its flood insurance programs, pushing up rates for homeowners, according to the New York Times. For the first time, the government will also take into account a home’s size, which means the owners of large beachfront properties are in for even larger rate hikes. FEMA (Federal Emergency Management Agency) manages the creation and revision of flood maps across the United Stated. NFIP (National Flood Insurance program) is managed by FEMA that enables homeowners, business. owners and renters in participating communities to purchase federally backed flood. insurance as an insurance alternative to disaster assistance. Along with this responsibility, FEMA has to use a formula or pricing strategy guideline for flood insurance. FEMA Risk Rating 2.0 is the new pricing methodology. This methodology leverages industry best practices and cutting-edge technology to enable FEMA to deliver rates that are actuarily sound, equitable, easier to understand and better reflect a property’s flood risk. In 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act to phase in full-risk prices for most NFIP policyholders over time. However, the act resulted in huge increases in premiums…some as high as $63,000. Only an act of Congress can change these congressionally mandated statutory protections. Congress also strictly limits how much grandfathered rates can increase in a single year (generally no more than 18%) and how much coverage can be offered under an NFIP policy ($250,000 for a residential building), which will not change under Rate 2.0. Risk Rating 2.0 does not affect the grandfathered rates for newly mapped or pre-Flood Insurance Rate Map (FIRM) properties or rate discounts under the Community Rating System (CRS). Only an act of Congress can change these congressionally mandated statutory protections. Congress also strictly limits how much grandfathered rates can increase in a single year (generally no more than 18%) and how much coverage can be offered under an NFIP policy ($250,000 for a residential building), which will not change under Rate 2.0. NAR’s recent townhall with FEMA regarding the National Flood Insurance program’s (NFIP) new pricing methodology Risk Rating 2.0. (Note: RR 2.0 only affects NFIP policies. However, there are a number of private flood policies that aren’t affected.) Risk Rating 2.0 Discussion from FEMA - Since the 1970s, rates have been predominantly based on relatively static measurements, emphasizing a property’s elevation within a zone on a Flood Insurance Rate Map (FIRM). FEMA is building on years of investment in flood hazard information by incorporating private sector data sets, catastrophe models and evolving actuarial science. Phase out of flood insurance subsidies could upend coastal real estate markets - Starting Oct. 1, the federal government plans to start gradually reducing subsidies for its flood insurance programs, pushing up rates for homeowners, according to the New York Times. New policies beginning Oct. 1, 2021 - All remaining policies renewing on or after April 1, 2022 Update: Reasons = https://www.millionacres.com/real-estate-investing/articles/flood-insurance-is-about-to-get-more-expensive/