FEMA eliminates some flood insurance discounts

Commercial and residential property owners on Anna Maria Island might want to check with an insurance agent to find out if or when flood insurance premiums might go up.

The Federal Emergency Management Agency on Oct. 1 released a new base flood-elevation map for Anna Maria Island. As on the previous FEMA map, the entire island falls into what FEMA calls a Special Flood Hazard Area.

FEMA also announced a five-year plan to phase out subsidized flood insurance premiums. FEMA’s Community Rating System provides flood insurance discounts of up to 25 percent of the premium from the actuarial rate as determined by insurance companies.

The Biggert-Waters Flood Insurance Reform Act, passed by Congress in July 2012, requires subsidized discounts to decrease 20 percent each year for five years beginning this year on Oct. 1.

At the end of five years, all structures in a SFHA will be rated by insurance actuaries, according to the FEMA website.

Anna Maria building official Bob Welch said the FEMA program to phase out subsidies on flood insurance premiums is complicated.

Both Welch and Bradenton Beach building official Steve Gilbert are advising property owners to contact their insurance agents as soon as possible.

Welch said the Biggert-Waters Act primarily affects single-story pre-FIRM structures — those built before 1975. After 1975, FEMA required new residential construction to be built above the base flood elevation.

While insurance for most of these post-FIRM houses will be unaffected, there may be problems when new FEMA rate maps are released, Welch said. That information should be available from FEMA within the next few weeks, he said.

Properties that may take an immediate hit on flood insurance premiums are those purchased between July 6, 2012, and Oct. 1, according to FEMA’s website. Welch said property purchased between those dates may not get a discount and the insurance carrier could put the flood insurance premium at the highest possible risk, according to his understanding of Biggert-Waters.

Real estate agent Larry Chatt said he knows one homeowner who bought during this period and the flood insurance premiums on the house tripled Oct. 1.

Chatt said he and other real estate agents are trying to determine “fact from fiction” regarding Biggert-Waters because there is so much information available and not all of it appears correct or applicable to Anna Maria Island.

“We are carefully watching flood insurance premiums and FEMA’s implementation of new rates. We will do everything possible to get the right information,” Chatt said.

The actual rate for flood insurance on a property won’t be known until the insurance carrier has the new FEMA rate map and the company actuaries assess the potential risk from a 100-year flood event, according to FEMA’s website.

In Chatt’s opinion, if Biggert-Waters might encourage investors to pay cash for a property and go without flood insurance. Similarly, commercial property owners might have to increase rents to cover higher flood insurance premiums.

“This could get complicated,” he said.

Welch said complications come, in part, from not knowing what FEMA’s standards for structures in a flood plain will be for the insurance carriers to use in setting rates.

Building officials need the information for anyone building a new home on the island, and insurance agents need to know what standards a particular insurance carrier will use in determining flood insurance premiums, he said.

Gilbert said if Biggert-Waters takes full effect on Anna Maria Island, it could “turn the barrier islands into ghost towns” in the next five years.

However, not every state affected by Biggert-Waters is accepting the act’s provisions.

U.S. Sen. Mary Landrieu, D-La., introduced a bill calling for changes to Biggert-Waters that would retain some of the government subsidies for premiums.

Landrieu said it’s possible in Louisiana that someone’s flood insurance monthly premium might exceed the mortgage payment. Her bill is before a Senate committee.

Gov. Rick Scott has said the state supports a lawsuit filed by Mississippi against the Biggert-Waters Act, but will not join the suit.

According to FEMA’s website, “full-risk rates will be phased in over five years at a rate of 20 percent per year to reach full risk rates.”

The website also says that Biggert-Waters “calls for the phase-out of subsidies and discounts on flood insurance premiums.”

Editor’s Note: This is the first in a series of articles on the Biggert-Waters Act and how it affects flood insurance on Anna Maria Island.

2 thoughts on “FEMA eliminates some flood insurance discounts

  1. Susanne

    Raymond, You’re correct. FEMA sets the rates, not the carriers. They are “promulgated” rates based on elevation. No insurance company is allowed to raise them for profit. Anna Maria Island’s Base Flood Elevation (BFE) is 10 feet on the current maps. My home is raised 1 foot above the ground, but I just got an elevation certificate showing it’s officially at 6 feet BELOW BFE. This story should have included interviews with surveyors and engineers, not building officials and real estate agents. Maybe that will be the next article in the series.

  2. Raymond Blacklidge

    So once the new maps are adopted, does all grandfathered discounts and rates go away and the new much higher rates go into effect without the current discounts? Who are these insurance companies that you say determine the actuarial rates? I thought this was a Federal program just serviced by private carriers. I thought the Federal Flood insurance program has no correlation to actuarial rates and that they base rates on elevation of property. If it were based on actuarial science I believe the fact is Florida is already paying too much in Flood Premium since we pay into the Federal Flood program much more than we take back in claims.


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