- Published on Wednesday, 30 January 2013 23:44
- Written by Super User
By WILLARD KILLOUGH III
CAROLINA BEACH - The Town of Carolina Beach is examining changes to federal law governing flood insurance coverage and how those changes will affect property owners. A presentation is planned for the Council's March 12, meeting.
In addition to the issue of rising homeowner's insurance rates, National Flood Insurance Program rates may rise for some homeowners.
President Obama signed into law the Surface Transportation Bill (H.R. 4348) on July 6th, 2012. In that bill was the re-authorization of the National Flood Insurance Program (NFIP) also known as the Biggert-Waters Flood Insurance Reform Act of 2012.
Under the new law, flood insurance premium rates on many properties in special flood hazard areas will increase. The new rates will reflect the full flood risk of an insured building and some insurance subsidies and discounts will be phased-out and eventually eliminated. Rates on almost all buildings that are, or will be, in special flood hazard areas will be revised over time to reflect full flood risks. Based on various conditions set forth in the law, subsidies and grandfathered rates will be eliminated for most properties in the future.
The Act removes two longstanding “grandfather” clauses that are likely to be very expensive for property owners in or even near the respective 100-year floodplain shown on flood maps.
According to Spencer Rogers of the North Carolina Sea Grant, "The first grandfather clause applied to buildings that were constructed before Dec. 31, 1974, or the initial Flood Insurance Rate Map (FIRM) for each local community, whichever is later. The buildings are called pre-FIRM. Since the National Flood Insurance Program (NFIP) was developed in the 1970s, various groups recognized that in order to get communities to join the program and adopt the local flood ordinances, the program must offer subsidized or lower than actuarial rates for the existing, noncompliant buildings. The NFIP offered flood insurance for all buildings in the community, at subsidized rates, if they were willing to adopt higher flood standards on new construction after the maps were implemented. There have been regular calls for removing the subsidized rates since they were implemented."
Rogers explained, "The Reform Act leaves the subsidized rates in place for primary residences except for houses: 1) newly purchased; 2) not previously insured; 3) with temporary policy lapses; or 4) substantially damaged or with improvements more than a cumulative 30% of the fair market value. The Act deletes all subsidies for second homes, rental houses, businesses and severe repetitive loss properties. The present subsidized rates will be increased 25% each year until the actuarial rates are reached."
Homes located in a high-risk flood zone (i.e., zones beginning with an “A” or “V”) and built before the first flood insurance rate map became effective, and that have not been substantially damaged or improved, may currently be receiving subsidized flood insurance premium rates.
Flood risk is unique to each structure and depends upon factors such as the elevation of the property relative to predicted flood levels, the construction style of the building, and the flood risk zone. FEMA publishes flood hazard maps that show predicted flood levels and flood risk zones based on historical climate information and the best available science. Some common examples of Special Flood Hazard Areas include coastal floodplains, floodplains along major rivers, and areas subject to flooding from ponding in low lying areas.
Many properties in Carolina Beach are located in flood plain areas.
For example, areas along the oceanfront are typically located in VE zones while those located farther inland are located in AE zones.
For example, the Carolina Beach Town Hall is not located in a flood zone while Carolina Beach Elementary School is located in an AE zone.
To view a map of these zones, visit the Town of Carolina Beach website at www. carolinabeach.org under the Planning Department section. Or, visit www.FloodSmart.gov
According to Spencer Rogers, as an example of the premium increases, coverage for a $100,000 building and $40,000 contents now has an approximate annual pre-FIRM premium in the AE-zone of $1,256. If the older building can meet the present floor-elevation requirement, the rate increases 16%. In the case that the building is at least 1 foot below flood elevation (BFE), the present rate triples or more. In the VE-zone, the present $2,221 premium will increase to $7,566 (241% increase) or more if the building is 3 feet or more below BFE on the latest maps.
According to the Federal Emergency Management Agency (FEMA) people can save money on flood insurance by reducing thier flood risk. Flood insurance premiums are based on flood risk. Therefore as flood risk increases, flood insurance premiums also increase.
Home and business owners whose properties have been flooded must make important decisions about repairing, rebuilding, or relocating their building. One choice would be to repair or rebuild to current standards. However, if advisory base flood elevations indicate that elevations have changed, or if other factors in the future cause the flood elevations to rise, these home and business owners would be missing out on a significant opportunity to mitigate their future flood risk and thereby lower their future flood insurance premiums.
One specific way for people to reduce future losses and your premium is to raise your building above the minimum required elevation standards or to floodproof your non-residential building. Flood insurance premiums are lower for buildings in high-risk areas that are elevated above minimum requirements, so rebuilding higher provides immediate flood insurance benefits. Generally, the higher a building is elevated above flood levels, the lower the cost of flood insurance. Additionally, depending on where you live, other ways to reduce premiums could include adding vents to enclosures, installing breakaway walls, or relocating your structure further from the flood source if possible.
Flood zone designations can also change as flood risk changes. The flood zone that is designated for a structure can dictate the construction methods required to receive reduced flood insurance rates. For example, newly-constructed or substantially improved structures in V-zones must be elevated on post, piers, or pilings. Because zone designations can change, FEMA recommends that those living near existing V zones consider rebuilding using posts, piers, or pilings.
According to Carolina Beach Planning Director Ed Parvin, the Town operates under the Community Rating System (CRS). The residents of Carolina Beach receive 15% reduction in their flood insurance rates because there are activities that the Town performs under the CRS program (i.e. mail flood brochures to residents). However, along with the Reform Act, the entire CRS system is being reworked.
Parvin plans to give the Council an overview of (1) the changes that are occurring, (2) show who is being impacted and (3) give Council a list of what the Town is doing and (4) potentially could start doing to improve their CRS rating.
Parvin explained earlier this month to Council, "We are still getting some data from the state but would like to have a presentation ready for you at the March 12, 2013 Town Council meeting."
Spencer Rogers explained for federally guaranteed mortgages the insurance is required no matter what the cost. Therefore, any owner with a federally backed mortgage will have little choice but to pay the new NFIP rates.
He explained, "For many years, Congress had limited any NFIP rate increase to less than 10%. That limit has been increased to 20%. NFIP rules and policy have historically required that the Flood Insurance Rate Maps and the insurance rates were based on present rather than future conditions. The Reform Act establishes a Technical Mapping Advisory Council, which is given one year to develop recommendations for future condition mapping, including sea-level rise and future development. The latter refers to stormwater runoff increases due to future development, which can be an issue in riverine flood modeling. Both could potentially result in significant increases in the base flood elevations. The Council could choose to add either to future flood mapping methods or maintain the present policy preventing any impact on insurance premiums."