On July 6, 2012, the President signed into law H.R. 4348 which allows rates to increase by 25% until actuarial rates are achieved. This is done by removing the subsidy rates. Okay, so what’s the big deal?
The big deal is that in addition to paying more, this also increases the penalties for non-compliance. Meaning that if you don’t carry flood insurance, when the disaster does happen, FEMA has more leverage to reduce claims paid.
Many times schools, colleges and businesses will do the cost/benefit of paying 10 years of NFIP premiums vs. the loss that may occur and the claim reimbursements they may receive. In a lot of cases these organizations are rolling the dice. Well the odds are now in favor of FEMA. What to do? Get familiar with the new regs and talk with your broker and guys like Jerry Quinn about how to proceed.
There are some up sides to the rules, such as with the mitigation programs. The new regs allow for the Flood Mitigation Plan to be part of the community’s multi-hazard mitigation plan. This can alleviate some labor hours and fees in developing the plans separately.
It also gives back demolition and rebuild as a mitigation activity. It does strike a blow by limiting the amount of funding for plan development to $25k for a community. This may be one of the bigger challenges for organizations and communities to face.
For more information, you can read the document here http://wilmes.co/podcasts/ratehike.pdf