The 2012 Biggert Waters Act made sweeping changes to the National Flood Insurance Program (NFIP). The goal of the Act was to help stabilize the NFIP, which had fallen deeply in debt to the federal government as a result of excessive claims over a period of years and no planned loss reserves to deal with the claims. Although the goal of the Act was a good one, the Act had the effect of raising the cost of flood insurance dramatically in certain circumstances. The Homeowners Flood Insurance Affordability Act (HFIAA) of 2013 worked to bring relief from those high premiums. Basically, the Act reinstated subsidized premium for homeowners whose homes were built prior to their community joining the NFIP. The initial subsidized premium will increase annually by no more than 18% in most cases, with the exception of non primary homes, rental homes and commercial properties that will increase at 25% per year. It also reinstated grandfathering.
Although the HFIAA brought premium relief for premium relief for some homeowners, I am still seeing high flood insurance premiums for other homeowners. The properties that I am speaking of were either built or substantially improved after the community joined the NFIP but the properties were not built to the NFIP specifications. For instance, I recently quoted a home that was substantially improved after the Town of Fairfield joined the NFIP. The builder left a small basement intact rather than fill it in and install the proper amount of flood venting. The flood insurance premium for this house was about $45,000.
I have come across a number of homes built or substantially improved in those first years after Fairfield joined the NFIP that have similar problems from a rating standpoint. I believe this is the result of the program being new and both the Town and the builders not being exactly sure what was required at the time of construction.
Hopefully, future flood insurance regulation will take into account these properties and allow for some premium relief. Perhaps the flood insurance act that follows Biggert Waters, which will expire in 2017, will include a grace period of say 5 years after a Town joins the NFIP for newly constructed homes or substantially improved homes. In the case of Fairfield, that would be homes built from 1978 until 1983. There was a learning curve during that period for the Town and for builders and that learning curve should be taken into account when developing rates for theses homes.