Premium increases effective April 1, 2016, will comply with all the limitations on premium increases introduced by the Homeowner Flood Insurance Affordability Act of 2014. Those limitations are as follows:
- premium rates for four categories of Pre-FIRM subsidized policies—nonprimary residential properties, business properties, Severe Repetitive Loss properties (which includes cumulatively damaged properties) and substantially damaged/substantially improved properties—must be increased 25 percent annually until they reach full-risk rates;
- the average annual premium rate increases for all other risk classes are limited to 15 percent while the individual premium rate increase for any individual policy is simultaneously limited to 18 percent; and
- the average annual premium rate increase for Pre-FIRM subsidized policies must be at least 5 percent.
Section 6 of HFIAA provides that the premium rate for flood insurance for certain properties newly mapped into areas with special flood hazards shall for the first policy year be a “preferred-risk premium” for the property and shall be increased at no more than 15 percent by class, or 18 percent per policy, until a full-risk premium is achieved.
Section 3 of HFIAA prohibits the use of Pre-FIRM subsidized rates for any policy under the flood insurance program that has lapsed in coverage. Effective April 1, 2016, a policy will not be eligible for Pre-FIRM subsidized rates or the Newly Mapped procedure under the following conditions:
- the policy reinstates coverage on a building that was previously covered by a Standard Flood Insurance Policy that expired or was cancelled;
- one or more of the named insureds on the new policy was either a named insured on the expired or cancelled policy or had an ownership interest in the building at the time the policy expired or was cancelled;
- the policy was reinstated with premium received:
- more than 90 days after prior policy expiration or cancellation where the named insured has maintained continuous coverage on the property from April 1, 2016, to the prior policy expiration or cancellation date, or
- more than 30 days after the prior policy expiration or cancellation date, where the named insured has not maintained continuous coverage on the property from April 1, 2016, to the prior policy expiration or cancellation date; and
- the policy expiration or cancellation was for a reason other than that:
- the insured was no longer legally required to obtain and maintain flood insurance, or
- the insured property was in a community that was suspended from the NFIP and the policy was reinstated within 180 days of reinstatement of the community as a participant in the NFIP.
In order to ensure that the cap on annual premium rate increases applies to all policies, including transfers and rollovers, FEMA is requiring additional information to be presented on policy declarations to assist the receiving insurer in validating the correct rates. Specifically, the company’s National Association of Insurance Commissioners identification number must be provided on the policy declarations page. Additionally, the TRRP Plan reported policy number, clearly labeled and limited to 10 characters, must be included.
Think PIA first