G. Flood Insurance

RECOMMENDATION / COMMENT
G.1a. In addition to current mandatory purchase requirements, Rrequire flood insurance in 100- andthe 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,
eErosion 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)

/ 1a. To make this work, there will need to be a requirement to include 500-year floodplains in all future remappings.
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.
I think.
G.2. Discontinue practice of waiving theHave mandatory flood insurance requirement apply after issuance of LOMRs, LOMR-Fs and LOMAs; apply risk-based rates 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 F.5, K.15, T.8 / 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.
G.3a. Ensure the movement to actuarial rates over time continues for all non-primary residences as per BW-12pre-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. rat – / We should promote the need for all pre-FIRM buildings to eventually get to full-risk rates.
G.4. Gradually eliminate grandfathered rates over time by having a surcharge of x 50 percentage after the firsteach claim of more than some percent of value or by and then charging actuarial rates at renewal once a damageafter 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, 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.
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.
G.7.a. Apply mandatory purchase requirement to all non-federally regulated or insured mortgages
b. or rRequire allthat 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.claim
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?
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.
G.10. Require flood insurance on Map any structure outside the SFHA for which two or more damage claims or federal disaster assistance have been are paid due to flooding as a floodplain structure so that insurance is required and regulations applyunless it is mitigated; also increase the rates 20% with each claim Also see A.5 / 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.
G.11. Implement law that allows FEMA Director to impose use of ICC when beneficial to NFIP Fundtying to mitigation efforts / 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.
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. / 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.
G.15 (b). Require EC’s for all new floodplain permits and require that the community keep copies and make available publicly, even if they are not a CRS community. / The challenge is how to police this and what happens if they don’t?
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.
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. / This does not belong under NFIP Flood Insurance. It should be moved somewhere else.
G.16. Continue marketing campaigns for both purchase and renewal of flood insurance policies; target marketing to homeowners without mortgages and in areas of low penetration. Work much more closely with WYOs, state and national insurance associations, FEMA Regions, CERC Contractor, B&SA field reps, NFP Training Contractor, NFIP SCs, and local communities where targeting is occurring so they may leverage what is being done where.
G.17. FEMA should significantly expand the agent training provided by NFIP Training Contractor, both the number of courses and topics (i.e., legislation changes, ICC, mitigation options, non-reg products like depth grids, Changes Since Last FIRM), as well as in-person classroom instruction courses. This should also support agent training that incorporate floodplain management, flood mapping familiarity , and mitigation, and to require at least 3 hours of continuing education in flood insurance for license renewal by end of 2015 for those states that don’t already require it.
G.18. Use outreach, monitoring, and other measures to enforce the NFIP requirement to identify and insure state- owned and locally-owned floodprone structures, with required pay back to the federal treasury and NFIP for non-compliance / Bruce: If the building has not received federal disaster assistance or does not have a federally-backed loan, they can just self-insure it, correct? So, don’t know if this makes sense to have. So, I deleted it.
John: 44CFR Part 75.1 talks about states that are self-insured. It list FL, GA, IA, KY, MA, NJ, NY, NC, OR, PA, SC, TN, and VT. As self-insured states.
The others are supposed to carry policies as I understand it.
G.19. Improve working relationship among floodplain managers and insurance industry, with FEMA and the professional organizations assisting in fostering this relationship / All agree; but this needs to be flushed out more with some examples.
G.20 Modify the NFIP to require mapping and management of and to provide erosion/mudslide coverage only where those hazards are mapped and appropriately regulated, possibly via a surcharge / See 1b.
G. 21 Establish additional levels of risk zones, or add a surcharge for flood insurance for on buildings in floodways (analogous to V Zone ratings) for maps and flood insurance / Will grandfathering be applied/allowed
G.22 Establish higher rates for structures in high velocity or erosion prone riverine areas. / Are these not accounted for already in the maps? If not, how will this information get to the insurance agent for rating? This needs to be identified before it is made a recommendation.
G.23 Review the existing policy base, and continually perform Quality Assurance, to ensure structures are shown to be within the appropriate community to prevent policy holders from receiving an inappropriate CRS discount. / Who is this recommendation to; community? FEMA HQ/Contractor? This is such a minor issue, it should not be part of a big policy paper. Maybe a comment in passing but not a key recommendation.
John: I agree it is a minor issue. I am sure it happens, just like using a participating county’s CID in the jurisdiction of a non-participating community.
G.24. Establish a requirement that by 2020 all owners of insured structures must obtain Elevation Certificates and place on file with local governments and with FEMA. FEMA, working with local governments, provides incentives to implement. Provide CRS credits for communities who do this for all floodprone structures; also allow use of other cost share funding for this / See G.15b.
As written, this is a financially burdensome requirement on the homeowner and FPA. There is no need for them in NSFHA and why force someone to get it when they don’t need it.
G.25. Ensure actual cost of flood insurance is communicated clearly and directly to all policy holders each year, regardless of discounts or subsidies / While all agreed, it is very vague. We need to be more specific on what we mean.
G.26. Require signoff of all claims over 25% or similar threshold by community floodplain administrator as part of claims processing for substantial damage determination and mitigation / This needs to be tied in with G13. All claims data should be made available as the claims are adjusted via Quick Claims reporting procedure (e.g., go to FTP site and download); one comment was they’d like to see the actual total damages, especially when more than the NFIP limit.
G.27. Allow communities direct access to claims data as they are being processed for use in regulatory processes / See G26 and G13; these should be tied together.
G28. Increase ICC. Also, allow purchasing of additional ICC coverage up to $150K. / The challenge is that the total still cannot exceed $250K or $500K.
G29. Provided optional Basement, Additional Living Expense and Business Interruption at actuarial rates
G30. Direct States to earmark NFIP premium taxes (about 2.5% of premium are paid to states, but the amount varies state-to-state) to mitigate high flood-loss buildings. / This is a long shot and don’t know if we wish to include it
G31. FEMA should release an annual report on ICC detailing the funds expended and what was accomplished with them.
G32.Detailed tracking and enforcement of required flood insurance on Group Flood Insurance Policies and flood insurance on SBA Disaster Loans post-Flooding.
Flood insurance should also be required on these SBA Disaster Loans that are in NSFHAs. / Currently, there is no tracking nor enforcement of GFIP certificate holders (or subsequent property owners) that are required to carry coverage after the 3-year GFIP expires. Likewise, in a research study I was involved with in 2006, there was no system at the SBA to track flood insurance on loans, hence no enforcement if they let it drop.
Finally, if a property owner is getting an SBA Disaster Loan or IA Grant due to flooding, flood insurance should be required no matter what zone. If it flooded once, it will flood again.
G33. Explore offering an alternative rating that would negate getting an EC but instead use LiDAR / For example, the insurance agent can click on that structure location on a digital map and be given a “factor” based on BFE, LiDAR-based elevation of the grade and then rate the building. If the insured doesn’t like the premium, they can get an EC and go the route of traditional rating.
NC will be doing this in the near future
G34. Require flood insurance on all loans regardless of flood zone. / Ya gotta dream!