National Flood Policy—ASFPM 2015 Recommendations

G.  Flood Insurance

G.1. Require graduated levels of flood insurance in 100- and 500- year floodplains, storm surge zones, erosion zones, and residual risk zones associated with structural projects (preferred risk rates for latter), including those behind levees.
Also phrased “G.1a. In addition to current mandatory purchase requirements, require flood insurance in the 500- year floodplains. If needed to assist lenders, include it in the definition of SFHA and mark it as a type of Zone A (e.g. AM)”
1b. Require mapping of other related flood-risk areas, include in the mandatory purchase requirement-if not already, and charge appropriate rate:
• Coastal Zone A – require mapping the LiMWA and either create a new zone (e.g., AC) or provide a surcharge storm surge zones,
• Erosion zones – already a zone designation; create rates, and
• Behind levees (and other structural projects) – get rid of Zone D and replace with a new zone designation such as AL; allow residual risk zones associated with structural projects (preferred risk rates, and
• Dam inundation zones – require the mapping of these areas and the mandatory purchase of flood insurance (e.g., create a new zone like AD) for latter) / Is this suggesting insurance on ALL properties, not just those with a mortgage? Good question==LL
It already is (by lending institutions)!!
Mark Riebau: What am I missing? Flood insurance is required (by banks) in the 100-year floodplain.
1a. To make this work, there will need to be a requirement to include 500-year floodplains in all future re-mappings.
1b. What needs to be weighed in this and 1a. is if it is easier to change the mandatory purchase portion (except for Coastal zone) so new zones are not needed or create new zones.
John: Consider including Coastal A Zones (LIMWA) area in the definition of Coastal High Hazards. Since the 3 foot wave is not a CFR, it is a mapping standard. It could be changed to the 1.5 foot wave or higher without any rule making.
including behind levees (even certified levees)
Again, FEMA’s coastal maps have included storm surge in determination of 1% and 0.2% floodplains for >30 years. Are you suggesting we expand mandatory purchase to other areas (e.g., surge zones mapped using other methods, like in Hurricane Evacuation Studies)? If not (which I recommend), delete this!
Property ownership is voluntary, and unless the decision privatizes a public good to the detriment of the public, I don’t see a reason for the government to increase the forced placement of insurance. To some extent, we would be better off to refuse insurance to camps (many not actually built to any building code standard) or other substandard structures in an effort to encourage the decommissioning of those unsafe structures. Insurance encourages people to rebuild when they might not have been able to afford to without it. People with camps sometimes pocket the insurance doing minimal repairs and make a profit on the insurance proceeds. There is no limit to the number of times people can flood and get claims paid, and no connection between these claims numbers or values and the flood insurance premium. Requiring all structures to get flood insurance will get in revenue, but also increase payments and eliminate the incentives to mitigate that risk or pay off mortgages to eliminate the burden on the NFIP. FEMA must then stand firm and not pay disaster funding to people who were not insured encouraging rebuilding in place.
G.2. Discontinue practice of waiving the flood insurance requirement after issuance of LOMRs and, LOMR-Fs and LOMAs; apply risk-based rates F.5, K.15, T.8
Also phrased “Have mandatory flood insurance requirement apply after issuance of LOMR-Fs and do not allow basements to be added to properties receiving LOMR-Fs; however, allow preferred risk rates. Also, have it apply to LOMAs on properties which had been required to carry flood insurance other than LOMA-OAS related to new map changes.” / FEMA has the rating option called “Conversion” where they can convert the SFHA-rated policy to a PRP to the last policy effective date and refund the different. They should evaluate doing that automatically when the LOMA/LOMR-F is issued and then after they get the notice that they can drop coverage from the lender, they can make the decision then. FEMA should also evaluate not allowing basements to be built for buildings obtaining a LOMR-F. also put in sect F
LOMRs are actually an interpretation that the structure is not really in the SFHA and FEMA has this process to account for the maps being created on a macro scale, yet when you get more detailed information on a specific property, it is shown to not be in the floodplain. Insurance should be waived since no longer in floodplain.
Recommendation to delete completely.
G.3.a. Ensure the movement to actuarial rates over time continues for non-primary residences as per BW-12 all pre-FIRM buildings, including at rates described in Biggert-Waters and allowed for in HFIAA.
b. After the second claim on a pre-FIRM building, it must go on the 25% path to actuarial rates path at renewal. / We should promote the need for all pre-FIRM buildings to eventually get to full-risk rates.
Buss: Full actuarial flood insurance rates must be reached for all properties sooner rather than later.
G.4. Gradually eliminate grandfathered rates over time by having a surcharge of x50 percentage after the first each claim of more than some percent of value or by and then charging actuarial rates at renewal once a damage after the second claim is paid / Rating needs to be simplified here, so like the two claim rule for PRP eligibility, we should keep it to 2 as well. There should be no threshold as that may encourage some fudging of numbers and again makes it more difficult. The other option is 25% increase starting the second claim.
G.5. Movement of insurance rates toward actuarial must be balanced with increased tools, assistance and funding for mitigation to help homeowners and small businesses with affordability of insurance. This could include means tested vouchers to pay off low cost mitigation loans, credit for mitigation or others means, but must be done carefully to ensure it does not increase the moral hazard. / No disagreement or changes on this one.
AS ORIGINALLY WRITTEN, COMMENTS MIXED AND CONFUSED MITIGATION WITH SUBSIDIZES PREMIUMS
G.6. Create more stratification in insurance rates to reflect the variety in risk within flood zones; this must be linked to providing tools to insurance agents to simply how they can correctly rate a policy. The current NFIP approach that results in rates for some shallow flooded structure to be the same is deeper flooded structures does not encourage mitigation or development in lower risk areas. / While there was agreement, there is concern on how this overly complicates an already complicated program. To provide more stratification would that require additional data from the maps/study that is not there or if there, is not available to agents?
The highlighted part does not make sense.
Bruce: Doesn’t having BFE/BFD and LFE accomplish some of what is being suggested? I’d suggest deleting this.
In areas with an effective Risk MAP product so there are depth and probability grids?
While I am in total agreement with this, can we please Map the Nation first??
To ensure that such a policy does not result in an infrastructure that is even more difficult to administer than current flood zone ratings, much thought must be given on how to achieve such a graduate approach to insurance rating, including the consideration of a community-wide policy or other radically different approach to flood insurance.
G.7.a. Apply mandatory purchase requirement to all non-federally regulated or insured mortgages or require that lender to pay the claim
b. Require all lenders to pay the flood loss up to the replacement cost of the home if in an SFHA and there is no flood insurance policy. Also no IA will be paid for what a flood insurance policy would have covered. / This would be something for congress to address since it is an instance of a non-regulated business required to enforce.
Love the thought, but this will never fly – that is why we have IA now – it is politically correct; delete last part of statement
G.8. Ensure compliance with NFIP mandatory purchase requirements; at every-year anniversary of mortgage, and upon transfer; ensure penalties are applied for violations. / Lenders are to be doing this now (besides maybe the annual check); so what can we offer differently? Lenders are apparently not doing it, since big policy drop 3 years after disaster-LL
G.9. Revise NFIP regulations to make zone changes effective immediately, without regard to lender notification or changes in status of mortgage / Not sure what this means, as when a new FIRM goes effective, so does the insurance requirement. Are we suggesting getting rid of the 45-day letter cycle?
Bruce: I’d suggest deleting this. Not sure where this came from--LL
This could be politically untenable; the issue of notification of policy holders may make this difficult to achieve smoothly.
G.10. Map any structure outside the SFHA for which two or more damage claims are paid as a SHFAfloodplain structure so that insurance is required (mandatory) and NFIP regulations apply; also increase the rates 20% with each claim Also see A.5
Also phrased “Require flood insurance on any structure outside the SFHA for which two or more damage claims or federal disaster assistance have been paid due to flooding unless it is mitigated.” / After the second loss, it will go to Standard Zone X rates which in many instances are around the cost equivalent to Zone AE at BFE.
For structures (residential or non-residential) disaster assistance should only be available once. If the building is flooded a second time, and it isn’t insured, too bad.
Comment received: since this would then be a non-mapped flood zone, notice must be provided to any potential buyer. Typically, the buyer would consult the FIRM.
A reverse LOMR?
G.11a. Implement law that allows FEMA Director to impose use of ICC when beneficial to NFIP Fund
G.11. b-Provide enough funding to elevate and/or buyout ALL properties where people are WANTING to mitigate to comply with increasing flood insurance premiums as a result of Grimm Waters. No benefit cost ratio analysis would be required. No elevation would be allowed higher than 15 feet. Do this instead of consider any other avenues to reduce the cost of flood insurance such as, has been discussed, vouchers for low income people to pay the flood insurance. –L Buss / We need to be careful to not create a policy where the insured purchases a policy for a minimal amount just to get the $30K ICC. It then no longer becomes an insurance policy but a cheap grant subsidy program.
This doesn’t make sense. ICC is available for any structure that meets the program criteria. Suggest striking.
Allow ICC to be used when a building in substantially improved. Why not elevate the prior to the flood. Cost should be lower and more resilient community.
G.12. Promulgate insurance rules to financially neutralize repetitive loss properties through actuarial rates, deductibles, or by actuarial rates if mitigation is not done after any offer; incentives can be a part of this effort / This is nice, but it needs meat/direction to give to FEMA
G.13. Set up a procedure by which the NFIP compliance of a structure is automatically verified after a claim is paid for substantial damage or even a second or third claim, this should be used for eligibility in CRS and NFIP? (CAV) / There was a concern on tying in CAVs and eligibility due to timing. In general, claim data should be made available for all FPAs as they are reported in FEMA’s Quick Claims. This should also be made available to the NFIP SC
G.14. Continually Evaluate CRS to ensure that activities that merit rate reductions are reducing losses / Nice, but can we give better direction to this one? How? How often? Independent TF or contractor?
G.15. (a) Establish clear and rigorous audit procedures for CRS communities compliance, and do this on a set schedule, especially post-disaster, but also for auditing on a regular basis. CRS compliance is essential and must carry penalties for non-compliance. All policyholders pay for CRS credits whether in CRS community or not, at a cost of over $200 million per year. And, where FEMA undermines CRS communities by approving inappropriate LOMRs, assess penalties against the FEMA staff.
G.15 (b). Require EC’s for all new floodplain permits for structures and require that the community keep copies and make available publicly, even if they are not a CRS community.
G.15 (c). Examine potential for community based insurance, multi-year policies purchased by and for the community at-large and based on actual risk. as outlined in provisions with HFIAA.
G.15 (d). FEMA disaster program could offer or work with the reinsurance industry to offer communities insurance for their infrastructure and disaster assistance in general. It should be required of all communities and could be subject to the CRS discount. It would cover roads, bridges, waterlines, sewer, stormwater, power, telecommunication, treatment plants, debris removal, - basically everything now covered by PA. / a. This is already being done, as they lose their credit if they aren’t doing what they say they are doing. They have to yearly report and have a CAV every 3-5 years. A bigger issue is when FEMA HQ approves inappropriate LOMCs which undermines CRS communities. I hear many reports of CRS communities non-compliant for years-LL
a. But who is going to pay for this? Non compliant community I assume--LL