The House Passed the Homeowners Flood Insurance Affordability Act aka HR 3370. Here is how it impacts the Florida Keys:
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The Bill instructs FEMA to strive to limit premiums to 1% of the coverage amount. Since coverage is capped at $250,000, that would mean that Congress would prefer that no single premium exceed $2,500. Further, FEMA is to report to Congress all premiums that exceed that cap. This is a goal, and not a requirement. While the Bill is silent as to whether this 1% increase cap applies to second homes and businesses, FIRM is taking the position that it should. Such properties are just as critical to coastal economies as primary homes; a structure’s vulnerability is not determined by its use. We will strongly advocate for their inclusion in the same actuarial soundness methodology.
For Primary Homeowners:
Pre-FIRM properties will see rate increases of 5%-15% on average by group class per year until the actuarial rate is reached. In addition, the maximum rate increase for any individual property is capped at 18% per year. (However, if your policy lapses not because you’ve paid off your mortgage or paid cash for your home, or if your community receives a “rating downgrade” in the Community Rating System, or if you decrease your deductible or increase your coverage, your premium could increase more than this.)
Further, refunds will be given directly to anyone who purchased a pre-FIRM primary home between July 2012 (when Biggert-Waters took effect) and the law is enacted and thus paid an exorbitant increase. These refunds should be distributed directly from NFIP within about 16 months.
Post-FIRM properties that complied with existing building codes when they were built remain grandfathered at least until Congress re-authorizes the NFIP or changes the law (scheduled for 2017). In other words, they are exempt from the 5%-15% average glide path increase (18% cap on any individual policy) and will remain in their current rate construct. If, however, they become included in a new flood plain due to zone re-mapping, they will pay the Preferred Risk Policy Rate in year 1, and then enter the rate increase glide path that applies to them.
A $25 annual surcharge will be applied to every policy on a primary home.
For Second Homeowners, Businesses, and Repetitive Flood Loss Properties:
Subject to the general umbrella thresholds for all properties set forth above, these properties will enter into an average 25% glide path rate increase until actuarial rates are reached. A $250 annual surcharge will be applied to these properties. FIRM does not believe that second homes and businesses should be treated the same as severe repetitive loss properties, and will continue to work towards more equitable treatment of second homes and businesses.
Other Beneficial Terms:
FEMA is required to complete an affordability study and develop an “affordability framework” within 18 months upon enactment of the law. They can utilize other Federal agencies in the analysis and have been given $2.5 million in funding. A second affordability study will determine the impacts specifically on small businesses, non-profits and houses of worship.
FEMA will now have the option of accessing the private reinsurance market if doing so makes financial sense. They must also be transparent in rate-making both for Congress and homeowners.
Homeowners can make payments on an annual or monthly basis. They may have the option of securing a “high deductible” policy ($10,000 deductible) at a lower premium. They will no longer be required to carry flood insurance on accessory, detached buildings but only on the structure that serves as their primary residence.
FAIR INSURANCE RATES IN MONROE
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Note: Pre-firm properties are those built before the effective date of the first Flood Insurance Rate Map (FIRM) for a community. These properties were built prior to detailed flood hazard data, flood elevations regulations and before buildings were built with flood protection in mind. For Monroe County these are structures built before 1975.