| April 18, 2016
Hatteras Island Real Estate: Changes in flood insurance costsBeginning
on April 1, a number of changes took place in the National Flood
Insurance Program (NFIP). The changes that could have the most direct
effect on policyholders are those related to premium increases.
By TOM HRANICKA
As background to the current increases, it has been widely reported
that the National Flood Insurance Program is anywhere from $23 billion
to $25 billion in debt. This deficit is the result of NFIP claims
exceeding the program’s premium income, starting with Hurricane Katrina
on the Gulf Coast and continuing through Hurricane Sandy, which heavily
damaged properties from New Jersey northward.
In an attempt to remedy this situation, Congress directed the Federal
Emergency Management Agency to get the NFIP program on more solid
financial footing. Efforts to achieve this goal have been ongoing for
the past few years.
In July 2012, Congress and the President approved the Biggert-Waters
Flood Insurance Reform Act of 2012. The purpose of this
legislation was to enhance the NFIP’s fiscal situation by increasing
inadequate flood insurance premium rates until they reflected the true
actuarial risk associated with the properties that were being
While well-intended, the Biggert-Waters legislation was poorly drafted,
resulting in increases in flood insurance premiums that were so large
that they could have caused some policyholders to lose their homes.
To correct these deficiencies, in March 2014, President Obama signed
into law H.R. 3370 – the Homeowner Flood Insurance Affordability Act.
This law amended several provisions of the Biggert-Waters Act in
order to moderate some of the most egregious unintended consequences of
The changes that took effect on April 1 are part of the game plan to
ultimately raise flood insurance rates to the point where the NFIP
program is once again financially self-sustaining. The total average
premium increase for all NFIP policies will be 9 percent. The maximum
rate increase for any individual policy is expected to be 18 percent.
For businesses, the cost will be even higher.
The actual increase for an individual policy will be based on a number
of underwriting criteria, such as flood zone, year built, and property
type. These increases are in addition to the congressionally mandated
policy surcharge of $250, and a federal policy fee of $25 to $50,
depending on the type of policy that an individual has.
It should be noted that local flood insurance rates can be expected to
be affected by the new Flood Insurance Rate Maps for Dare County, which
are scheduled to be released for preliminary review later this year.
Matters relating to insurance can be confusing, so the best advice for
homeowners is to contact their insurance agent to determine what
impact, if any, the April 1 changes may have for their individual
Hranicka is a broker with Outer Beaches Realty. Questions, comments, or
suggestions for future articles may be sent to Hranicka at P.O. Box
280, Avon, NC 27915 or emailed to [email protected] Copyright © 2015 Tom & Louise Hranicka. All rights reserved.)