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More Changes Coming to the National Flood Insurance Program What to Expect#This is an audio-enhanced PowerPoint presentation. To hear the audio, please open this presentation in Slide Show view.1More Changes Coming to the National Flood Insurance Program What to ExpectImpact of changes to the NFIP under Homeowner Flood Insurance Affordability Act of 2014

#Welcome and thank you for joining us.

This presentation will provide you information regarding the NFIP reform. These two laws caused changes to the NFIP , which could affect many stakeholders. First, we will review the Biggert-Waters Flood Insurance Reform Act of 2012 and then move into the Homeowner Flood Insurance Affordability Act of 2014 .2Biggert Waters Reform ActSection 205Targets:Non-Primary ResidencesBusinessesSevere Repetitive LossesNewly purchased building or policy, lapsed policy

Implementation began January 1, 2013

Section 207Impacts map changes:GrandfatheringPreferred Risk Policy Eligibility Extension

Replaced by Homeowner Flood Insurance Affordability Act 2014

#The Biggert-Waters NFIP Reform Act was signed into law on July 6, 2012. it is important to understand these two very important sections of this law, before we can understand what has changed with the Homeowner Flood Insurance Affordability Act.

When Bw-12 was enacted, it was decided that this law would be separated into two major sections instead of being implemented all at once.

First, lets discuss section 205 and which policies received immediate full risk rates and the ones that received the phase in of full risk rates. Keep in mind that these rate increases began on January 1, 2013.

So, If you newly purchased a Pre-FIRM building or flood policy, or, let your flood policy lapse on or after July 6th, 2012, You would have been required to be moved to full risk rates on your 2013 renewal. In other words, you would have needed to obtain an elevation certificate and be rated accordingly.

Now, lets discuss the phase in of full risk rates aspect of Section 205:

January 1, 2013 began with the phase in of full risk rates for Pre-FIRM non-primary residences. On their first renewal following this date, these policies began receiving a 25% increase in their flood insurance premium.On October 1, 2013, this was the date that began the phase in of full risk rates for Pre-FIRM Commercial and Severe Repetitive Loss policies.

Keep this section in mind as we move forward:

Section 207 was going to have a significant impact to the NFIP, because this section was going to phase out and eliminate the grandfather provision. This section has been removed and was replaced by Homeowner Flood Insurance Affordability Act 0f 2014.3Definition: Severe Repetitive Loss2 losses exceeding the market value of the building, or 4 or more claims over $5,000 each

Severe Repetitive Loss Buildings

#As a refresher, here is the official NFIP definition of a severe repetitive loss property:

You have to have had two flood losses exceeding the market value of the building, orfour or more NFIP claim payments over $5000 each.4Homeowner Flood Insurance Affordability Act of 2014

Signed by President March 21, 2014

#Now, lets discuss the Homeowner Flood Insurance Affordability Act, that was signed into law by President Obama on March 21, 2014.

Its important to understand that this law repeals and modifies certain provisions of the Biggert-Waters Flood Insurance Reform Act and makes additional program changes to the NFIP

While FEMA actively works to implement the new law, we encourage policyholders to maintain and keep current flood insurance policies. FEMA does NOT recommend cancelling a flood insurance policy. Cancelling flood insurance policies now will leave policyholders unprotected during our flood and hurricane season and may cause policyholders to lose important discounts on their rate if they reinstate in the future.

The new law lowers the recent rate increases on some policies, prevents some future rate increases, and implements a surcharge on all policyholders. The Act also repeals certain rate increases that have already gone into effect and provides for refunds to those policyholders.

FEMA is working with Congress, the private Write Your Own insurance companies, and other stakeholders to implement these Congressionally mandated reforms and to working toward our shared goals of helping families maintain affordable flood insurance, ensuring the financial stability of the NFIP, and reducing the risks and consequences of flooding nationwide. FEMA will also continue to identify and publish special flood hazards and flood risk zones as authorized and required by Congress.

FEMAs initial priority was to assess potential changes to the NFIPs business processes and stop policy increases for certain subsidized policyholders as outlined in the Act. On April 15, 2014, FEMA issued a bulletin to its WYO companies directing them to begin using Pre-FIRM subsidized policy rates for all new business and renewals.

It is not possible for changes to happen immediately. While the new law does require some changes to be made retroactively, other changes require establishment of new programs, processes and procedures.5Key PrioritiesFEMA continues to analyze and implement the new Act. Initial PriorityFEMAs initial priority was to stop policy increases for subsidized policyholders as outlined in the Act. Key Priorities include:Refunds, Rates, and SurchargesMappingPromote MitigationFlood Insurance Advocate

#FEMA is currently analyzing this new law, to ensure it is implemented as the Congress intended it to be. Along with stopping policy increases for subsidized policyholders, we have outlined four key areas of concentration:

We will look at:

Refunds, Rates and SurchargesMappingWays to Promote MitigationAnd last but not least. The Flood Insurance Advocate

6Latest Actions- October 2014October 1, 2014 Bulletin to Write Your Own (WYO) insurance companies with guidance to change systems on the following matters:Bring all rate tables up to date on the rates required by HFIAA (10/1/14)Implement a new Congressionally approved surcharge for all policy-holders (4/1/15)Implement a new Congressionally mandated high deductible option (4/1/15)Maintain grandfathered rates for existing policyholders newly mapped into higher risk in the flood plain (10/1/14)

#On October 1, 2014, a FEMA Write your Own Bulletin was issued to the insurance companies. This bulletin explained that their rating software will be updated to ensure it complies with the new reform act. As you can see from the 4 items listed above, the NFIP policy surcharge and high deductible option will not be implemented until April 1, 2015. We will discuss these items further in the presentation.

7Technical Mapping Advisory Council (TMAC)Appointments are complete and an informational call has been completed with membersThis administrative call took place September 10, 2014 and settled many logistical requirements in advance of this weeks in person meeting.The first in-person public meeting has been conducted The first in-person public meeting of the TMAC occurred September 30-October 1 at the United States Geological Survey (USGS) Auditorium in Reston, VirginiaA Federal Register Notice was published on Sept. 15 with agenda and public comment informationThe TMAC is anticipated to hold 3 virtual and 3 in-person public meetings within its first year (October 2014-October 2015)

#The Technical Mapping Advisory Council (TMAC) is a federal advisory committee established to review and make recommendations to FEMA on matters related to the national flood mapping program authorized under the Biggert-Waters Flood Insurance Reform Act of 2012.

This Council recently held its first public meeting in Reston, VA and it is anticipated they will hold a total of six meetings within its first year.8Refunds, Rates, and SurchargesThe new Act mandates refunds of the excess premiums for certain flood insurance policies affected by the Pre-Flood Insurance Rate Map (Pre-FIRM) subsidy elimination required by BW-12.Refunds to be issued on or after October 1, 2014 and will be completed by the end of the calendar year. An estimated 1 million policyholders will receive refunds. The average refund will be $100, with refunds ranging from only a few dollars to thousands of dollars.

Refunds

#REFUNDSFor certain flood insurance policies affected by the Pre-Flood Insurance Rate Map(Pre-FIRM) subsidy elimination required by BW-12, the new law mandates refunds of the excess premiums that those policyholders were charged pursuant to the requirements of BW-12. These refunds will affect only a small percentage of the overall NFIP policy base.

This refund process began on October 1, 2014 and will be completed by the end of the calendar year.

918 Percent Cap on Premium IncreasesThe bulletin aligns rates with the 18 percent cap on most individual policyholders with the following exceptions:Non-primary residences;Severe Repetitive Loss properties; andSubstantially damaged and substantially improved properties.

Moving forward, NFIP will be developing requirements for noting business properties and practices for charging HFIAA compliant rates in 2015.

#The Reform Act states that NFIP policies should see no more than an 18% annual increase in their rates. However, there are 3 categories of policies that will be receiving a 25% annual increase. These categories are your Pre-FIRM:Non-Primary Residences (such as your vacation home)Severe Repetitive Loss propertiesAnd your substantially damaged or improved properties. This means that if your structure is damaged or improved 50% or more of the pre-damage or improved market value, you will fall into this category.

Remember, these policies will receive a 25% annual increase until their policy reaches full risk rates.

If you see the last bullet, it has to do with Pre-FIRM non-residential structures. Due to the rule of identifying which non-residential structures ARE actually businesses, the 25% increase will not begin until they clearly identify them. Once they are identified, only the businesses will get the 25% increase. All others, such as churches and Private non-profits, will see no more than an 18% increase per year.10Reserve Fund AssessmentNew changes in the October 1, 2014 bulletin make changes to the Reserve Fund assessment as required by Biggert Waters. The Reserve Fund is aimed at assisting with the costs of NFIP claims that exceed the annual premiums collected and supporting the programs sustainability.

As of April 1, 2015 :10 percent annual rate assessment for Preferred Risk Policies (PRPs- fund included in premium); and 15 percent annual rate assessment for all other policies.

#In order to assist the NFIP with paying claims that exceed the annual premiums collected, a reserve fund assessment has been added to all policies. As you can see, the Preferred Risk Policies have a 10% annual reserve fund assessment added to them. Keep in mind that this 10% is already added into the premium rate tables.

For all other policies, there will be a 15% annual reserve fund assessment added. This 15% will be added once the policy premium has been calculated. In other words, once the premium is calculated taking into account the deductible chosen, the Community Rating System discount, adding the Increased Cost of Compliance premium, etc., then you will add the 15% reserve assessment. The NFIP rating software will calculate this for you.11HFIAA SurchargesHFIAA introduces a new mandatory surcharge that does not count towards the 18 % cap on individual policy increases.

Beginning April 1, 2015 for new policies and upon renewal, all policyholders will be required to pay:$25 for policies on primary residences; and$250 for all other policies.

The surcharges will be collected, with limited exceptions, until all policies are rated at the full risk rate.

#Starting April 1, 2015, there will be a mandatory surcharge added to each NFIP policy. Keep in mind that this does not count toward the 18% cap on individual policy increases.

For primary residences, there will be a $25 annual surcharge added to the premiumFor all other policies, there will be a $250 annual surcharge added to the premium.

These surcharges will be in effect until ALL NFIP policies are rated using full risk rates.12New Deductible OptionHFIAA includes a new high deductible option created by Congress that will begin on April 1, 2015.

A $10,000 deductible is available for residential policies. The same deductible option must apply to both building and contents coverage.

Lenders will have to determine if the high deductible option will be accepted for the mandatory purchase requirements.

#Also, starting April 1, 2015, there will be a $10,000 deductible option for residential policies. Remember, the same deductible option must apply to both building and contents coverage.

Keep in mind that this deductible option will have to have your lenders approval. In many instances, lenders will not allow their borrowers to obtain this high of deductible. It is recommended that the policyholder discusses this with their lender prior to requesting.13Refunds, Rates, and SurchargesHFIAA restores FEMAs ability to grandfather properties into lower risk classes.For properties newly mapped into high risk areas, the law sets first year premiums at the same rate offered to properties located outside the SFHA (Preferred Risk Policy Eligibility Extension). With limited exceptions, flood insurance premiums cannot increase more than 18% annually.Grandfathering (Sec 4)

#GRANDFATHERING

The new law repealed section 207 of BW-12 that was going to phase out the grandfather provision. Now, here is an example if you are moved from a non-SFHA zone, like an X, to a SFHA, like an AE. In this scenario, you are able to obtain the Preferred Risk Policy for the first year, and then your rate will increase no more than 18% per year until the policy reaches full risk rates. The full risk rate can either be the standard X zone policy, or the full risk AE zone, whichever is more beneficial.

14Flood Insurance AdvocateEducates on: individual flood risks;flood mitigation; measures to reduce rates through effective mitigation; the rate map review and amendment process; changes in the program as a result of any newly enacted laws;Assists in understanding how to appeal preliminary rate maps and implementing measures to mitigate evolving flood risks;Coordinates outreach and education with local officials and community leaders in areas impacted by map amendments and revisions; andAids potential policy holders in obtaining and verifying accurate rate information when purchasing or renewing a policy.

#FLOOD INSURANCE ADVOCATEThe new law requires FEMA to designate a Flood Insurance Advocate to advocate for the fair treatment of NFIP policy holders.

FEMA has now begun to look at this piece of the legislation to ensure they capture the true role this advocate would have. This advocate may be a single individual based out of FEMA HQ, or they may place an advocate in each of the 10 FEMA Regions. Please stay tuned for more information regarding this important piece.

15MappingTechnical Mapping Advisory Council (TMAC) to review the new national flood mapping program activities authorized under the 2012 and 2014 flood insurance reform laws. FEMA will seek the TMACs recommendations on meeting new requirements for the new mapping program including the identification of residual risk areas, coastal flooding information, land subsidence, erosion, expected changes in flood hazards with time, and others. The law requires the Administrator to certify in writing to Congress that FEMA is utilizing technically credible data and mapping approaches.

Technical Mapping Advisory CouncilFEMA will continue Mapping activities BW-12 requires FEMA to enhance coordination with communities before and during mapping activities and requires FEMA to report certain information to members of Congress for each State and congressional district affected by preliminary maps.Sec. 30 of HFIAA requires additional layers of enhanced notification and outreach to congress and other stakeholders.

Enhanced Communication and Outreach

#MAPPINGThe Homeowner Flood Insurance Affordability Act requires the Technical Mapping Advisory Council (TMAC) to review the new national flood mapping program authorized under the 2012 and 2014 flood insurance reform laws. The law requires the Administrator to certify in writing to Congress that FEMA is utilizing technically credible data and mapping approaches. The law also requires FEMA to submit the TMAC review report to Congress.

FEMA will be looking to the TMAC for recommendations on how best to meet the legislatively mandated mapping requirements for the new mapping program including the identification of residual risk areas, coastal flooding information, land subsidence, erosion, expected changes in flood hazards with time, and others.

As the new national flood mapping program is being established, FEMA expects there will be opportunities to make incremental improvements to current procedures as it provides flood hazard data and information under the National Flood Insurance Program (NFIP). FEMA will make those improvements where necessary to ensure all ongoing changes to flood hazards continue to be effectively communicated, mitigated, and properly insured against.

The law requires FEMA to enhance coordination with communities before and during mapping activities and requires FEMA to report certain information to members of Congress for each State and congressional district affected by preliminary maps.

16Saving Money on Flood InsuranceFEMA has programs to help owners reduce their risk and save money on flood insuranceCommunity-wide discounts through the Community Rating System (CRS)FEMA grant programs support rebuilding and relocatingUse of higher deductibles to lower premium costs

But the smartest way to save may be to build higher

#Now that HFIAA has been enacted and moving forward, we need to be cognizant and aware of ways our stakeholders can reduce their risk as well as their flood insurance premium.

The first way is the Community Rating System. This is a voluntary program where communities are able to obtain credits for duties they already may perform. Some examples may include requiring and maintaining FEMA elevation certificates for structures in your area, or having flood insurance brochures and conducting outreach that promotes the benefits. These credits that you could obtain could mean significant flood insurance premium discounts. For more information regarding CRS, please see the link at the end of this presentation.

Another idea would be FEMA grants that may be available in your area. These grants could be used to support various mitigation activities such as elevation or even buy outs. You may contact your local community for more information regarding the grant programs.

Also, a policyholder may be able to increase their deductible to assist them with lowering their premium. As always, use caution with this, because a deductible will need to be paid in the event of a flood loss, and a high deductible could be burdensome.17Key Takeaways - Mitigation

#BW 12 provides an opportunity to have a discussion about mitigation:

Property Owners Need to Understand their Risk:2012 Flood Risk Survey:Only 31% think their community can floodOnly 12% think their home will ever flood regardless of where they live

Buy Flood InsuranceMany people believe that the standard homeowner or business owner policy covers them for floodMost people do not understand that disaster assistance is not the end all

Collaborate & Communicate Among our stakeholders and partnersWe know this is key to the programs success or failure.18Tools and Resources

#There are many tools and resources available that will assist you in counseling your clients on the effects of the NFIP Reform Act19ResourcesFlood Insurance Reform Act Webpage - http://www.fema.gov/flood-insurance-reformFloodSmart for Consumers - www.FloodSmart.govFloodSmart for Agents www.Agents.FloodSmart.govFlood Insurance Manual - http://www.fema.gov/flood-insurance-manualNFIP iService Bureau - http://www.nfipiservice.comCommunity Rating System- www.crsresources.org

#Here are some resources that you will find useful when sharing this message with your friends, family or clients.

Two that I want you to pay particular notice to are the first, the Flood Insurance Reform Act webpage, which is located at the top of your screen. This site is updated on a regular basis and will have the latest information regarding the Homeowner Flood Insurance Affordability Act.The last bullet point talking about the Community Rating system crsresources.org is a great website for you to learn more about this important program that can make your community more resilient.20

#Thank you so much!21