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Brunswick County Association of Realtors discusses rise in flood insurance

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By Sam Hickman

 Legislators have started making amendments to the federal Biggert-Waters Flood Insurance Reform Act because of the impact the drastically increased rate premiums will have on the economy, a Brunswick County insurance provider said.

Jonathan Peele, president of Coastline Insurance in Southport, spoke about the act, which passed in July 2012, during the Brunswick County Association of Realtors meeting Thursday, Aug. 15.

Peele said the act will affect pre-FIRM (Flood Insurance Rate Maps) rated policies immediately, but the major changes will take place in late 2014. Premiums are expected to rise by an average of 10 percent after Oct. 1.

“Many lives are being changed by this bill and many of the major changes aren’t in effect yet,” he said.

The first section of the act targets pre-FIRM rated policies, or homes in Brunswick County that were built before the issuance of flood maps. Flood insurance rate maps were not issued in Brunswick County until around 1976, Peele said.

The second section will phase out subsidized rates that have been given to homes built pre-FIRM. If the policy was issued or assumed with pre-FIRM rates before July 6, 2012, the pre-FIRM rate will remain for one’s primary home. If the policy is for a secondary home, rates will increase by 25 percent each year until actuarial rates are reached.

For a policy issued or assumed with pre-FIRM rates between July 6, 2012, and Sept. 30, 2013, for primary and non-primary homes, the home will be re-rated at renewal with post-FIMR rates using an elevation certificate and the current flood map data. If an elevation certificate isn’t available, the policy will get a provisional rate for one year.

An elevation certificate is a document that is completed by a licensed professional land surveyor that provides the lot’s flood map data and the elevations of the building and the site.

For a pre-FIRM policy issued after Oct. 1 for primary and non-primary homes,

post-FIRM rates will be used using an elevation certificate and current flood map data. If an elevation certificate isn’t available, the policy will get a provisional rate for one year.  The policy will not be eligible for grandfathering.

The National Flood Insurance Program also will set up a reserve fund when the act takes effect Oct. 1. The Reserve Fund Assessment for polices effective after Oct. 1 is 5 percent of the total premium.

In addition, a 30-day waiting period will apply to all policies issued, regardless of whether flood insurance is required for a loan closing, as of Oct. 1. Previously, the waiting period was waived if there was a loan closing on the property.

Peele said the second section of the act requires FEMA to “adjust the rating for all policies when there has been a flood map change or revision to accurately reflect the current risk of flood.” Premium changes to these policies will be phased in over a five-year period with a 20-percent rate increase each year.

Policies will change dramatically when maps are redrawn, Peele said. He gave an example of a house built in 2005 in an AE flood zone with a base flood elevation (BFE) of 12 feet. If the lowest floor level is 2 feet above the BFE, the homeowner was paying $448 in flood insurance with no contents covered.

When the maps were redrawn in 2008 and the house fell into a VE zone with a base flood elevation of 14 feet, the lowest floor level was 2 feet below the BFE. The rates — again, with no contents covered — then increased from $448 to $12,074.

Peele said now that legislators are realizing the unintended consequences of the act, he is “cautiously optimistic” that major changes will be made to it.

 

Sam Hickman is a staff writer for the Beacon. Reach him at 754-6890 or shickman@brunswickbeacon.com.