National Flood Insurance Program - A Quick Update on Changes

The following is a quick summary of the critical information for the National Flood Insurance Program (NFIP) changes brought on by the Homeowners Flood Insurance Affordability Act of 2014.

  1.           HFIAA 2014 – Highlights of Key Changes to BW-12 reforms:

On March 21, 2014, President Obama signed the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA-2014) into law.  This law repeals and modifies certain provisions of the Biggert-Waters Flood Insurance Reform Act (BW-12), enacted in 2012. HFIAA also makes additional program changes to other aspects of the program, adding to other reforms of BW-12. However, it is also critical to note that many provisions of the BW-12 remain and will continue to be implemented.


In general, as a result of HFIAA:


FEMA will restore many policies to pre-Flood Insurance Rate Map (pre-FIRM) rates. Formerly subsidized properties that were required to pay “full-risk rates” will, at some point, be allowed to return to a subsidized rate if it is more favorable than the full-risk rate. This return to subsidized rates is welcomed news to many property owners.

This rate rollback targets:

  • New applications processed for pre-FIRM buildings on May 1, 2014 and later.
  • Pre-FIRM policies assigned to a new building owner on or after July 6, 2012. This affects new or renewal policies processed on or after May 1, 2014.
  • All lapsed policies for pre-FIRM buildings not covered when Biggert-Waters was enacted.
  • Full-rate policies purchased on or after July 6, 2012. These policies may renew at the subsidized rate if processed on or after May 1, 2014.

FEMA also announced that refunds would be given to policies that overpaid.


  1. The new law repeals the BW-12 provision that:  Upon the effective date of a new or updated Flood Insurance Rate Map, to phase in premium increases over five years by 20 percent a year to reflect the current risk of flood to a property, effectively eliminating FEMA’s ability to grandfather properties into lower risk classes.
  2. Also for newly mapped-in properties, the new law sets first year premiums at the same rate offered to properties located outside the Special Flood Hazard Area (preferred risk policy rates).
  3. With limited exceptions, flood insurance premiums cannot increase more than 18 percent annually
  4. In order to enable new purchasers of property to retain Pre-FIRM rates while FEMA is developing its guidelines, a new purchaser will be allowed to assume the prior owner’s flood insurance policy and retain the same rates until the guidance is finalized. Also, lapsed policies receiving Pre-FIRM subsidized rates may be reinstated with Pre-FIRM subsidized rates pending FEMA’s implementation of the rate increases required by the Homeowner Flood Insurance Affordability Act.


  1. The new law requires gradual increases to properties now receiving artificially low (or subsidized) rates instead of immediate increases to full-risk rates required in certain cases under BW-12.
  2. FEMA is required to increase premiums for most subsidized properties by no less than 5 percent annually until the class premium reaches its full-risk rate. It is important to note that close to 80 percent of NFIP policyholders paid a full-risk rate prior to either BW-12 or HFIAA, and are minimally impacted by either law.
  3. With limited exceptions, flood insurance premiums cannot increase more than 18 percent annually
  4. There are some exceptions to these new general rules and limitations. The most important of these exceptions is that policies for the following properties will continue to see up to 25 percent annual increases as required by BW-12 until they reach their full-risk rate:
    1. Older business properties insured with subsidized rates;
    2. Older non-primary residences insured with subsidized rates;
    3. Severe Repetitive Loss Properties insured with subsidized rates; and
    4. Buildings that have been substantially damaged or improved built before the local adoption of a Flood Insurance Rate Map (known as Pre-FIRM properties).


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