[Welcome / Introduction]
Amy Sebring: Good morning/afternoon everyone and welcome to
EMForum.org. I am Amy Sebring and will serve as your Host and Moderator
today and we are very glad you could join us.
Today’s topic is an update on the implementation of the Biggert-Waters Flood Insurance Reform Act of 2012.
Now it is my pleasure to welcome back David Miller, Associate
Administrator of the Federal Insurance and Mitigation Administration
(FIMA). Prior to joining FEMA in 2011, David had a long history of
experience as a state and local emergency manager, and served as State
Director for Iowa when they had the floods there.
Also joining us for the first time is his Senior Advisor, Kristin
Cormier Robinson who is leading the team coordinating the implementation
of the legislation. Kristin previously worked for NEMA for
several years on legislative efforts, including getting increases to
emergency management capacity building programs and support for EOC
construction.
Please see today’s Background Page for further biographical details and
links to several related resources, including the new Webpage for the
Act at FEMA.gov which includes a number of Fact Sheets, as well as other
summaries.
Welcome to you both, and thank you very much for taking the time to be
with us today. I now turn the floor over to David to start us off
please.
[Presentation]
[Slide 1]
David Miller: Thanks, Amy. Good afternoon,
everyone, or for those that are in the afternoon. I guess for some
it is still morning. We are going to talk today about the
Biggert-Waters Flood Insurance Reform Act of 2012.
[Slide 2]
We are going to talk primarily about premium increases but also give you
a little background into where we are going and how we got there.
The other part of this is a couple of pointers about how to buy down
both the risk and the cost of those premiums. Kristin is with me
today and she is going to help me advance slides and I’m going to talk
and hopefully give us enough time to answer questions as well.
In July of 2012, Congress passed a law called The Biggert-Waters Flood
Insurance Reform Act as we refer to it. It was signed by the president
on July 6, 2012 and we have been in the process of implementing it ever
since. As a matter of fact there were a couple of things we implemented
right away.
One of them had to do with the waiting period for insurance to go into
effect. There are a couple of exemptions to that. Another
exemption was granted for people that were affected by fire on federal
land with flooding on federal land that exacerbated flooding
downstream. If you want to know more about that we can get you
information.
It tells you that the act went into effect immediately. At the
same time, it is going to happen over a period of years. We are
going to talk about the premium increases. One of the things that
prompted the act is actually twofold. The first thing is that we
were looking for stability in the NFIP program.
What we were hearing from our stakeholders is that they were looking for
a longer term reauthorization. We were seeing it in fits and
starts and short term reauthorizations of the NFIP. When it wasn’t
authorized we saw adverse effects on the housing industry because if
you were required to have insurance as part of your federally backed
mortgage and insurance wasn’t available, it stopped those processes.
In effect, interruptions to the NFIP were more than disruptive—they had
financial impacts. Stakeholders came together a little to our
surprise but thankful to Congress and the President we got a five year
reauthorization.
The other part of the NFIP was to stabilize the program
financially. We looked to put it on stronger financial
footing. This is the first effort to do that. Many of you
recall that we borrowed a lot of money especially relative to Hurricane
Katrina. The program was in debt although we were paying off that
debt—both the interest and the premium.
We needed to be on sounder financial footing. This year as we got
into Super Storm Sandy the truth is we had to borrow more money again
and it showed again that we needed more financial stability in the
program.
One way Congress made changes to strengthen the program financially is
to require usar to begin charging premium rates which reflect true flood
risk. We’ll talk a lot more about that in the next few minutes. Those
rate changes are going to impact a number of policyholders over time and
I want to provide you some details on that. At the end of the day
over a period of years almost everybody will be affected one way or
another.
What is key is when you are going to be affected, what the triggering
mechanisms are and the kind of increases we may see in premium costs
over time.
[Slide 3]
What is changing? There are things that everyone affected by
flooding or at significant risk for flooding needs to know. Flood
insurance rates are changing. If you received subsidies, and this is the
key, or discounts in the past, you will no longer be able to rely
on those subsidized or discounted rates to keep premiums artificially
low.
This was the intent of Congress—premiums needed to reflect the risk and
we needed to move there over a period of time. Rates are going to
more accurately reflect actual flood risk. We’ll be relooking at
actuarial tables. There will be a publishing of the new actuarial
tables in a number of areas beginning in June so you’ll see not only a
removal of subsidies but also the actuarial tables will change as
well. We’ll talk about how that rolls together.
It is not going to affect everyone at the same time. We will talk
about two sections today—sections 205 and 207 of the law—what they mean
and how they’ll be implemented. It is important to note the things
that affect risk. One of the things we talked about in Biggert-Waters
in getting to the actuary risk is how we calculate that.
I’m not going to focus on studies we need to do and where we are going
but there are sixteen areas of studies in Biggert-Waters. Part of
it is also to look at future conditions and incorporate them into our
risk and risk analysis. That can be the weather patterns, erosion,
development and key factors. It may at some point add climate
adaptability.
There are a number of things that we are required to look at over a
period of time. We are not quite sure how we are going to do but I
think over a period of years you will see those things built more and
more into our actuarial tables.
[Slide 4]
Who is going to be affected? Let’s look at who will be affected by
changes beginning in 2013. Not everyone who has a flood insurance
policy will be affected by the Biggert-Waters Act changes. The Act only
requires the NFIP to phase out subsidies in certain specific cases.
Subsidized rates are used when properties were constructed or
substantially improved either before December 31, 1974, or the effective
date of the initial local Flood Insurance Rate Map (what we call FIRM
maps) whichever is later. So if your home or property is older than the
FIRM, chances are good you were receiving a subsidized rate.
Pre-FIRM properties that do get a subsidy represent only between 40% and
45% of the full-risk premium rate—they are paying pennies on the
dollar. Owners of residential property that is not a primary
residence (and this is the first trigger) and are located in a Special
Flood Hazard Area, or what people refer to as the Hundred Year
Floodplain, will see or have begun to see a 25% annual increase
until rates reflect true risk. That began January first of this
year.
For those of you that deal with this issue especially—non-primary
residences received a 25% annual increase and they will continue to
receive 25% increases until the rates reflect their true risk.
That began January first. It comes up in the renewal processes of
their policies.
One of the keys here, because it has been confusing, is that there has
been discussion that it is 25% for a period of four years and then I’m
at my full rate. The problem it is 25% of the rate you pay now
until you get to your full rate. The fact is the actuarial rate
for your property may also change and may increase as we do new rate
tables in June. It is not just over a four year period. It may be
extended longer than that. This is under section 205.
Owners of property which has experienced severe or repeated flooding—if
you want to look at the code itself there is a definition for severe
repetitive loss and repetitive loss properties—or that have incurred
flooding cumulative damage with flood insurance payments exceeding the
value of the structure will see 25% increase annually until rates
reflect true risk. That will begin in late 2013.
We have some work we need to do in this area plus the dialogue in the
arrangement we have with the write-your-own companies so we can do
proper notice to them. They need to involve it in their business
practices so you won’t see it kick in until late this year—probably as
late as October.
One thing before I move on. Owners of business properties in a Special
Flood Hazard Area—again we are talking about businesses now—they will
see 25% rate increase annually until they reflect true risk rates.
That is beginning late in 2013. Owners of substantially damaged
or substantially improved subsidized property will see 25% rate increase
later this year as well. Those are the Section 205 increases that
we are implementing now.
[Slide 5]
One of the keys here—and many people don’t know—the subsidized rates for
the NFIP for the 5.6 million policy owners we own—subsidized rates only
are reflected in about 20 percent of our policies. We don’t
have a lot of people affected at one time as this gets phased in.
Another thing to remember is that owners of primary residences in
special flood hazard areas will be able to keep their subsidized rates,
again primary residences, until a couple of things happen. Either
they sell their property—if they sell their property the new owner
doesn’t get phased in over time. They go to the new actuarial rate
right away.
They will pay the full actuarial cost and as the tables change the rates
will increase accordingly. They will feel it right at the
front end—the buyer of the property will. If you already have a flood
insurance policy and you allow it to lapse and then want to rejoin the
NFIP—again you will not be phased in. You will feel the full
actuarial rate at the time you repurchase.
You keep your subsidized rate until you suffer severe and repetitive
flood losses. If you purchase your policy after July 6,
2012—that’s the effective date of the law—if you are new purchaser of a
policy after then you will get the full actuarial late.
There is a new provision to the law. If you have refused an offer
to mitigate flood losses to your property—and there are some nuances
there that we are working through about what that means and how the
offer is tended, whether it is a whole mitigation offer which includes
HMGP and other mitigation offers or if it is under the flood insurance
program.
We think it is the latter. If you are made an offer under the
grants under the flood insurance program—FMA repetitive loss—and you
refuse that offer you will see your rates increase significantly. I
think those are some key triggers.
[Slide 6]
When will the changes occur? They have already begun.
Full-risk rates will apply to property not previously insured, newly
purchased, or to a policy which is purchased after a lapse—premiums for
older (pre-FIRM) non-primary residences in a Special Flood Hazard
Area—that has already begun at 25% each year until they reflect the
full-risk actuarial rate.
Later this year we will do premiums for pre-FIRM business properties,
severe repetitive loss properties and properties where claims payments
exceed fair market value will increase by 25% each year until they
reflect the full-risk actuarial rate. Normal rate revisions will occur
this year.
Under the previous law we were allowed to raise premiums at the rate of
ten percent a year on average. What we are looking at this
year—this is a little tough to explain—if you are in the 25% and you’re
getting kicked up this is already being built in. For those that
aren’t they may also see a rate increase of about five percent on
average this year.
Part of that is that we need to set and we are required by
Biggert-Waters to establish a reserve fund for future payment of
claims. We will be doing that. Later in 2014 premiums for
properties affected by map changes will increase over five years at the
rate of 25% per year and that is over five years until they reach their
full risk rate.
The last one we call Section 207—if you look at 207 in the law it talks
about map and map changes. We don’t expect map and map changes to
take effect until late in the calendar year of 2014 or the fiscal year
2015. We have a lot of work to do in this area about what map
changes will mean, how they will be incorporated and who gets affected
at what time.
There is a lot of discussion we have to do about implementing that
provision of the law. Right now that gets confused in a lot of
dialogues where flooding is going on or we are in the process of mapping
or re-mapping now. Even though that may be occurring in many
jurisdictions you aren’t going to see the effects of Biggert-Waters in
section 207 take place until late 2014 or federal fiscal year 2015.
[Slide 7]
Why are there changes in the NFIP? I want to go back and talk
about it. A number of things have happened. We are seeing
increased risk in the United States. It is so serious that
insurance companies—you have to remember when the NFIP was started when
they refused to insure because they couldn’t get a handle on the
calculation of risk—so in 1968 Congress created the NFIP. What we
are seeing under Biggert-Waters and others is changes in what we know,
when we know it and how the insurance industry may enter into
this. One of the things we are required to study is what is the
proper role of government in NFIP. What role can private insurers
and reinsurers play in this market? That also is in
Biggert-Waters.
Communities that joined the program had to adopt minimum standards for
new construction so that homes would be less at risk. We had to do
floodplain management in many of the areas and we are seeing that
evolve as well as we begin to consider risk and risk management and what
that does to actuarial tables and rates.
One of the things that is going on right now as we try to accumulate
best available data in an area that includes the flood insurance rate
maps is really a discussion on how we share that information and how we
use it to inform community decision making and also how it influences
rates.
You are hearing a lot of discussion these days in many communities about
how we may build in climate adaptation or climate change into the rate
settings. That is still up in the air for any number of
reasons. It is one of the things we are looking at right
now. We’re not using it to inform the actuarial tables or rates
but it is another area we are required to study and look at and build
into our structures. It is coming into the future.
[Slide 8]
The last thing on my list is what I can do to lower the costs.
Right now part of the issue with Biggert-Waters is one of the things
Congress did not address is the affordability piece. A lot of the
conversations you hear in communities have to do with the rate increase,
what it will mean to me, and if they come in and re-map me and I’m now
in an A zone or velocity zone which means I’m in the highest risk area.
My premiums are going to go up so high I can’t afford to live here
anymore or you’ve devalued my property and I can’t sell my property with
this hanging over it. Congress did not address those
affordability issues. We’ve been asked to study it. We are
going to engage in the contracts and efforts to do that.
I think with the amount of activity that is going on now Congress may
re-enjoin this conversation on affordability and we may see action on
this area sooner rather than later. It is iffy and up in the
air. Our requirement at Biggert-Waters is to study the
affordability issue. We will do that study and issue our findings
at a later date.
In the meantime there is only a couple of things folks can do. One
is, if you are a homeowner or business, it has to do with where you
build, how you build and what you’ve done to mitigate losses—whether you
have flood-proofed or whether you have elevated your property. That
will have an effect on the premium you pay and how you buy down.
In order to know how much you need to elevate and how you walk through
this process—one thing especially subsidized property never had was an
idea of their base flood elevation relative to the map. Why?
Because they were subsidized and they didn’t need the information.
You are going to see a renewed emphasis in this area about knowing your
base flood elevation—knowing where you are relative to the map.
That means getting an elevation certificate. That means actually
having to spend money to go out and get the engineers and people to plot
your property and know where you sit relative to the elevation.
That can cost as little as a couple of hundred dollars or it can cost a
lot of money depending on the work the engineers and points of reference
they have that they need to do to figure out where you are relative to
base flood elevations. You are going to hear of discussion about
elevation certificates over the coming months.
Again, building relative to that will help reduce your cost for the
insurance premium. The other thing that is becoming more known—and
I think we have a little over 1,200 communities in the program—is our
Community Rating System (CRS) program. It is an effort to go
beyond the minimum of the NFIP regulations and beyond the minimums of
local ordinances that we ask you to pass to participate in the NFIP.
There is a program we have that helps buy down that risk in a number of
categories. As you reach certain levels of that by planning, by
regulation and community effort you have the ability to buy down the
insurance rates for your community in increments of about five percent
for each level that you are at. Again, that is something that we
hope communities look at.
It has to do with floodplain management, building code enforcement, how
you do your permitting and the level of planning you have—there are
number of factors in the CRS program. You can find information on the
CRS program on FEMA’s website.
[Slide 9]
That covers most of what I have. Kristin and I are here and we are open for questions.
Amy Sebring: That is great David. Thank you so much for that introduction. We will move to the Q&A portion.
[Audience Questions & Answers]
Question:
Allen Ma: Will the transfer of an existing flood policy to a new property owner affect the flood insurance rate?
David Miller: The answer to that is yes. It
actually is that it is a reissue of the policy. When you sell your
property if you have a federally backed mortgage they will tell you
that you are required to have flood insurance. You’ll meet with
your agent or the mortgage company may force place you.
You’ll meet with an agent that offers either through a direct service or
write your own company that offers our rates—but rather than go to a
subsidized rate of that area you will get the full actuarial rate as the
actuarial table exists now. You will get that full rate as the
new property owner.
Question:
Robert McAleer: If a property owner has Flood Insurance as an
extra precaution, but the property is not located in a 100 year flood
zone, will the premiums increase for that property owner or will the
property owner have to pay the 5% assessment for the reserve fund?
David Miller: When we talk about the five percent assessment
for the reserve fund—that is where they are going to see their
increases. We have to accommodate that. At the end of the
day when we remove all the subsidies there is still a provision in
Biggert-Waters that allows us to have our rates reflect what the new
costs are as we continue down the road.
Rather than do that at the old ten percent rate on average they are
allowing us to go to the 20% rate. To answer your question—are the
people who live outside the special flood hazard area going to see the
rate increases? The answer is yes. Part of that rate
increase will be used for the reserve fund and this year we expect it to
be a little over five percent. Five percent of that will go into
the reserve.
Amy Sebring: You are not implementing 20% across the board at this point?
David Miller: Right. Remember the 25% has to do
with removal of subsidies from a number of properties in the special
flood hazard area. The 20% increases have to do with if you are
re-mapped and the zones change, then you will begin to see the 20%
increases over a period of five years.
The latter part of the answer is that if you get a map change after we
do the mapping late in 2014 when we set all the rules and information
about that—if you see a map change after that period depending on how
you are mapped and what that means you may see 20% increases until you
meet your full actuarial rate for a period of five years.
Question:
Joy Brooks: Will there be direct outreach from FEMA to affected property owners?
David Miller: In probably a less direct way than you may
have happen. We are already doing outreach through forums like
this. We have done Congressional briefs. We are working with
regions and those who execute the program.
The most direct thing people will feel is when they talk to their
insurance agent. When you field those inquiries—and a lot is being
written about the flood insurance program now—but as you get ready to
do the renewals and as we do more press information through external
affairs and we brief congressional, we have that interaction with
communities we always have especially with regard to mapping and
re-mapping—those are the dynamics you are going to see.
If you really want to know how you are going to be affected and you want
to know the outreach part of this, it is sitting down with your
insurance agent and saying, “How will this affect me? Is it going
to affect me now or is it coming later? What will this do to my
premiums?”
One thing you may want to do in preparation of that and knowing how you
will personally be affected—and this is an outreach we want to do as
well—is really knowing what your elevation is relative to the base flood
elevation. Elevation certificates are going to be a big topic of
discussion. That is already beginning and it will be a part of the
community dialogue.
Question:
Timothy Trautman: Under BW-12, what will the rating assumptions be if a property owner does not have a FEMA Elevation Certificate?
David Miller: What happens is the assumption is that the
map is correct. What happens is our maps that we build are based
on some assumptions and assumptions of flooding anyway. You need
to sit down in the community with the engineers about the preciseness of
our maps, how they are built, what assumptions go into them, what
elevations we look at and the data we look at to produce the map.
What we know is there is some gradation of error in there and they are
not as precise as some people would like them to be.
The only way to know if the map is really correct is to know what your
elevation is relative to the map. Otherwise it is a more
generalized approach.
Kristin Cormier Robinson: Each property is going to be
rated differently based on their elevation as it is assessed. So to have
that level of precision through an elevation certificate could
ultimately help a homeowner to lower their premium or to understand what
actions they have to take to mitigate for good return on investment for
that mitigation activity.
Question:
Amy Sebring: You mentioned the secondary residences—the
increases started, went into effect last January. They will be hit
with another 25% this January. After that, did you see a
noticeable drop in coverage? Was there a noticeable blip in
cancellations?
David Miller: We don’t know the answer to that yet,
Amy. It’s one of the things we want to look at and we want to work
with the companies that are doing policies to look at what our drop
rates are. Congress asked us to put financial stability into the
program and make the rates reflect the risk.
At the end of the day part of that was that as we increased policy
holders we get more financial stability in the program as well. If
we have policy drops depending on who drops and why they drop and what
we are asked to do it will be more than a little disconcerting to us and
we’ll have to figure out what that means about the financial stability
of the program.
I think part of the answering that is we are seeing the volatility of
the discussion and we see that the discussion of what the rates will be
is having an effect on insurance. We don’t know what it will do to
the fund overall but it may force Congress into talking about the
affordability issue even before our study is completed.
Question:
Amy Sebring: Is there outreach happening or planned to the governors in the states?
David Miller: Yes, we already did that as part of the
briefing we were doing last week. We are working with each of the
FEMA regions. We talked to the regional administrators and federal
insurance and mitigation staff within those regions. We do
outreach with the governors and outreach with the communities as
well. We really want the governors aware of it.
Part of the disconnect in the past is that states don’t regulate the
flood insurance program so you have a disconnect about how they buy in,
what they know and how it affects their communities. That is of
concern to us. We want to make sure they know about it because
frankly a lot of the calls will go back through their offices and we
want them equipped with the information they need to respond
appropriately.
Question:
Lura Cayton: Should flood plain managers be aware of the CRS program?
Amy Sebring: Let’s expand that to include, should elected officials be aware of the CRS program?
David Miller: They should. I used to sit on the
National Advisory Council. I remember one of the members there
from Florida was a member of CRS. He asked why more communities
weren’t in it and what they knew about it. The challenge for all
of us is the constant re-education as we see rollover in officials and
what they are aware of and how we brief them.
In all the things they have to hear about—whether it is the governor, a
legislator, a mayor, a county supervisor, a commissioner—it is one you
have to keep talking about and bringing up. When you get into CRS
or into the flood insurance program overall, these aren’t five minute
elevator speeches.
This is complex stuff. Getting the time and their attention,
telling them how it is going to affect their community, especially when
you are doing that when flooding hasn’t happened or they haven’t had an
event in a while—those are sometimes difficult conversations and it is
an area we need to do better in.
Question:
Steven Pyle: Could you explain why owners of secondary
residences and business properties will see increases in the SFHA but
primary residences will not unless they meet the 4 or 5 criteria?
David Miller: I wish I knew all the answers to that but part of
it is conjecture on our part. As we watch and others watch the
Congressional debate the thought on secondary residences and some of the
business is that they can absorb the cost. If you can afford a
secondary residence you can afford the removal of your subsidy.
That may not always be true but I have a feeling that was part of the
discussion in Congress.
Primary residences—I think we get into a lot of discussion about why
people are there, what the value of the property is, if they are there
because the community placed them there or if it is the house they can
afford at the time—there are a lot of discussion points that go beyond
that one.
All I can tell you is that this is the action Congress took and we are going to follow their instructions on implementation.
Question:
Amy Sebring: Do you need further definition of what constitutes a business?
David Miller: I think we will and there will be some
clarifying there. I think it gets down to, and when we go through
it I will have to talk to the insurance people and the write your own
companies, that it will have to do with the way we offer policy and
whether we insure them as a business or a residence. That may be
the definition they choose.
Question:
Richard Yazbek: Is the requirement for flood insurance still
tied to a federally insured mortgage under the new law, or are coverage
requirements going to be expanded beyond those with such a mortgage?
David Miller: The answer to the first part of the
question is yes. That is still there with the federally backed
mortgages, if you are in the special flood hazard area, require
coverage. It is an interesting thing that it is always said that
FEMA requires this. It is actually a provision of the act and you
will find that mortgage companies require it AND if you don’t buy it
they force place it. Force place insurance is usually much higher than
what we charge, although we may see that change with the removal of
subsidies. That is part of that discussion.
Will we see mandatory purchase expand? I don’t know the answer to
that. One of the things we are asked to study is the proper role of
government insurance in a roundabout way—what is the role of private
industry in this? How are they going to compete? How will
they sell a product? I think as we study this issue and talk to
the insurance industry and re-insurance industry we will see different
influences on how we look at policies, risk and risk analysis relative
to policies.
There will probably be some discussion on what mandatory purchase means
or doesn’t mean as we walk through this. We could see a
contraction of the mandatory purchase. I would keep my eyes open
on that one. It is a big topic of debate on risk and risk pool—who
is in, who is out and how we spread the risk.
That is an important piece of it as we talk to the insurance industry overall and how they may enter this business.
Question:
Amy Sebring: Do you have any data on how many policies in effect are mandatory basically versus voluntary?
David Miller: I don’t. Of the 5.6 million policies
we have we know that about 19-20% of those are subsidized
policies. I would have to look at the number that tell me how many
are mandatory purchases.
Question:
Donna Godfrey: On average, what is the amount of the reduced
premiums that a community may anticipate for its residents if it
participates in the CRS program and how much manpower will it require on
the part of the local government?
David Miller: There is a list of nineteen areas or maybe more—I
would have to look at the CRS program and I know we changed it a little
last year. If you look at it there are some relatively simple
things. A lot of communities don’t even enter at the bottom level
of it. If they have done floodplain management, adopted their
ordinance and do mitigation planning and those things they may have
already bought one or two levels in the program of those five percent
increments.
As you get further on and you manage and do structural and nonstructural
mitigation stuff and you participate in your community you will see
that those standards are a little tougher to make albeit we only have
only a handful of communities that are at the highest rating which I
think is equal to about a 45% reduction of premium.
Question:
Lura Cayton: If communities do everything possible under the
CRS how much might it lower the cost of insurance for residence?
And how long might it take a community to do the necessary things to
qualify?
David Miller: The answer to both is it really has to do with… I
was in Washington State last year as we awarded CRS upgraded
certificate to one of the communities in Washington State. In
visiting with them afterward the one thing I noted is that it is not a
local emergency manager’s piece—it is not the local zoning guy’s
piece. It really is a community effort and a community dynamic to
affect the CRS.
In talking to the person that managed it I think the effort is
significant. What I gathered from them is they calculated and
looked at overall community benefits not just what it did to insurance
rates. That is what got them to buy in. Frankly there were
some things that from a cost-benefit analysis they were choosing not to
do.
It required a substantial effort and they couldn’t afford to go to the
next step at this time. They were going to keep plugging at it and
looking at what they could do. They used it as a way to better manage
the community and make it more resilient.
So often we talk about the insurance premiums and rates that we charge
and we miss the whole discussion on risk and what we can do to mitigate
risk. Part of this needs to be part of that discussion. When
we begin a conversation with a mapping effort that we have it is
focused on who is in and who is out of the special flood hazard area and
what the premium will be other than what the map shows relative to risk
and what we can do to mitigate risk.
We don’t have to bite it off all in one big bite. We can do it in a
period of time. The good news is that insurance is
available. The good news is we can buy down the premiums and the
good news is we can make our communities more resilient if we take
mitigative action.
Question:
David Kvinge: In the NJ/NY area, advisory maps have been
prepared by FEMA. If a community adopts these maps, is it considered the
same as an update of the FIRM with respect to insurance rates?
David Miller: The answer depends on your community. Let
me walk through it because ABFE (advisory based flood elevation maps)
are key—we have offered them in the past. I think you saw them the
first time after Katrina. I can’t remember which state is
what—one state used them to inform. Which means local communities
could adopt the ABFE or choose not to, or they could choose to come
somewhere in between where the current map was and what the ABFE said.
In the other state they decided to adopt the ABFE as the new
standard. What we are trying to do—and then we saw them play out
differently as we had discussion in North Dakota. We saw them play
out differently last summer as we had discussions and ongoing mapping
efforts in Louisiana and when we get to New York and New Jersey relative
to Sandy.
The effort there as we discussed ABFE—what we noted in many of those
communities in New Jersey and New York is that maps were as old as
1983—they hadn’t been updated in quite a while. We knew that as
communities were planning to go forward they didn’t have the best
available data.
We wanted to be able to project that forward so they could make informed
decisionmaking on how to move forward. We knew we hadn’t gone
through the whole process. Part of the advisory process is that we
want to apply the science and we need to do it within this small
timeframe. We want to inform the building and the effort and mark a
point in time to move forward.
We also knew we hadn’t gone through the whole vetting process.
ABFE is part of a community dialogue. Many communities are
struggling with that. If you believe the ABFE is going to change
significantly, and where we see the most variability of the data is in
velocity zones and coastal areas, and that is a lot of what is affected
in New York and New Jersey.
As we see that you may want to wait until there is a chance to
completely vet the maps and have the ongoing discussion with
communities—get another layer of science in there and have the dialogue
so you don’t overbuild. In other areas they want to get on with
their building very soon and they want to know what to build to.
Our discussion is that if you want to know build to without having to
wait for the data to come out in another number of months if not a year
you may want to look at the ABFE and build to the ABFE. Because there is
a variance in there if you want to account for other things in it you
may want to build to ABFE levels plus a foot or two of freeboard.
Those are tough community discussions. They mean a lot of money
and they mean a lot of investment. Ours is to inform the decision
making as we go through. The other thing you will see the federal
government do as we issue our grants part of our discussion with
Secretary Donovan and others is—what is the federal standard for rebuild
where federal grant money is involved? In New York and New Jersey
we are looking at ABFEs plus a foot of freeboard.
Question:
Jack Brock: When the Preliminary DFIRMS came out, if a property
was identified within a floodplain that was not shown on previous FIRMS
the property owner could get a reduced rate if they enrolled in the
NFIP before the DFIRMS were approved. Is this still the case?
David Miller: In a way—there are two triggers here.
One is the subsidies for special flood hazard areas and non-primary
residences and the businesses and those things we talked about. The
other is the 207 changes that come with mapping.
What is going on now, if you want to protect the rate you have now
before we go to mapping and before we have actuarial tables we are
looking at in June—if you are in the middle of mapping and we haven’t
gone to the new increases and don’t know how we are going to get there
(that is in late 2014 or federal fiscal year 2015)—if you adopted your
maps now and you are in mapping you are going to see those rates stay
there until we re-map at a later date.
You’ll see those increases go to the full actuarial rate. I
realize it is a trick answer and there are some timing issues there, but
there are timings about when you map, when the new actuarial tables
come out, whether we put the mapping provisions of 207 in place yet or
not—there are some timing issues there.
The simple answer is that if you are going to look at maps and map
changes, 207 will be a driver in that and it will not become effective
until late 2014. I hope that answers the question but if we want
to get into more depth there will be an address provided after this by
Amy and we can get the technical people on it.
Question:
Siyavash Araumi: Is PRP still going to be offered by FEMA after January 1, 2015?
David Miller: The answer is—and I don’t have the date—we will
be phasing out the preferred risk policy. You’ll see increases in
those areas as well. What I don’t have in front of me now is the
“when”. Will we see increases in that area? Yes.
Question:
Allen Ma: Will properties newly brought into Flood Zone D be
phased into the higher insurance rate similar to phasing of properties
brought into the SFHA?
David Miller: I don’t know the answer to that but I will find the answer.
Question:
Michelle Brock: Will policy holders within CRS communities continue to
receive the discount associated with the community's CRS rating?
David Miller: Yes.
Question:
Amy Sebring: Do I understand correctly that there will be a rule-making process to incorporate these changes?
David Miller: In some areas we have to do
rule-making. That is part of the process we are sorting through
with the attorneys. As we look at the law and how we implement we
have already discovered a number of areas where we have to do
rule-making. Rule-making takes a considerable amount of time
depending on how we walk through that and the level of effort we have
but as we do that we will set priorities for rule-making as we move
through and that will affect the implementation dates of the number of
provisions of the law.
Question:
Amy Sebring: Three different NFIP funded programs have
been consolidated into one program—the severe and repetitive loss, FMA
and they have been authorized for $90 million. Is that funded out of
NFIP funds or do you have to have an appropriation for that?
David Miller: It is funded out of the premiums and fees
we collect. It doesn’t mean that while it is funded out of there
that Congress doesn’t have an action to take on how much money we are
allowed to take out of those funds. We don’t just arbitrarily put
this much in. Congress has an action they have to take to give us
the authorized amount that we can spend.
Amy Sebring: Do you expect to have updated guidance on those programs in the future?
David Miller: Yes, we do. As we consolidate and
make the offerings you will see some updated guidance on what those mean
and what the access is. I think what you will see is that they
will simply roll together and we’ll remove redundancies and yet retain
the flexibility that is in the program.
Question:
Amy Sebring: I understand there is a new national floodplain mapping program. How does Biggert-Waters affect the FEMA mapping?
David Miller: I don’t know if we can call it a new
program. A couple of years ago we went from map modernization to
risk map. Risk map is part of that effort. We will continue
to refine and update risk map. One of the things provided in the
law is a technical mapping council or commission that needs to be
established.
It builds on a practice we have had in the past few years. As we
go there it is to have the discussions to mediate mapping and the
science that we apply and how we walk through that. You’ll
continue to see that not just FEMA’s interest in there—the point is to
have a non-biased group with representation from the broad community to
talk about how we do maps, the science we apply to the maps, how we view
and how we apply the data.
Question:
Ron Davis: How will the actuarial rates be determined without calculating the first floor elevations for each structure?
Amy Sebring: Also I was wondering myself, generally are
the actuarial rates uniform nationally or are they totally based on
local conditions. Could you explain more on the basis of that?
David Miller: It just so happens that Andy Neal, one of our
actuaries just walked into the room. I don’t know how specific we
want to get but Andy can give some general answers.
Andy Neal: In general right now while we have many
structures that are not elevation rated under Biggert-Waters 12 we are
going to be moving most of the structures affected by the removal of
subsidies and when maps will change. Those will become elevation
rated. Part of that will means that the structures will need to
get elevation certificates to determine the elevation of their first
floor.
The question you asked about how the rates are set and whether they are
tailored to specific communities is a really good one. The
interesting thing is that our rates are based on the relationship to
that community’s base flood elevation—where their one percent risk is.
We give discounts to rates as you build above that one percent chance of
flooding and we give higher rates for people who will be below that
elevation.
But our maps allow those rates, although they are the same nationally,
to tailor to the community’s specific risk profile. You can
imagine that some communities have a very small special flood hazard
level and the base elevation isn’t high off the ground. Most of those
homes will be elevated even if they are just building in traditional
techniques, and not elevated techniques, and their flood insurance
premiums will be lower.
You can have another community that would have a base flood elevation
that is far above the ground so you do need to elevate. If you
don’t you will have a much higher premium if you were built on the
ground.
Even though the rates do apply nationally by looking at the one percent
standard then they are tailored to each community through that.
David talked about the technical mapping advisory council that will be
set up and the sciences that we use—we are trying to make sure they are
the best sciences available—to set that one percent level.
So if you elevated exactly to the one percent level in a flood hazard
area in Idaho, Florida or Alaska, no matter where, at that one percent
level we expect that you have a one percent chance of flooding and
actually have your first floor start to get wet. That gives an
indication that by using that base flood elevation it allows the
community’s risk to be tailored to the risk.
David Miller: There is one add-on to this because it is
part of the community dialogues that are going on now. I know that
the discussion on how those were set and how communities are rated is
key and we can get into technical specifics on that and how we look at
actuarial rates. What we want to avoid is part of what is going on
now—it is the sweeping generalizations of what premiums are going to do
simply because you live in a certain zone.
As Andy indicated we are more defined than that and we want to stay more
defined than that which means communities need to know how they sit and
individuals need to know how they sit if they want to know what is
going to happen to their rates. A sweeping generality that because
I live in a V zone, I am going to get charged an exorbitant rate—it
simply isn’t true—it may be more that exception than the rule.
Amy Sebring: The reason we wanted to do this program today
folks your people will be coming to you asking these questions. Even
your local officials, elected officials, may be coming to you to ask
these questions so we wanted to try to get the information out to you.
Please do check out the links on the background page, where you can find
further facts sheets that may be very helpful for you to
hand out to people to answer these questions. David, I presume there
will be more information posted to that page as time goes on?
David Miller: Yes there will. We will continue to work
with our intergovernmental affairs people, and external affairs and
congressional affairs people, to inform as we can. We will put more
information on our website as we move forward. The other is hitting the
regional offices as well. We are sharing our information with the FEMA
regional offices. They usually have the first contact in these
communities as far as FEMA representation. Don’t be afraid to use them
and we will do our best to keep them informed as well.
Here is the address where folks can follow up with specific questions: fema-iga@fema.dhs.gov
[Closing]
Amy Sebring: Very good! On behalf of Avagene, myself, and all
our participants today, thank you very much David and Kristin, and Andy
for joining us today and sharing this information. We wish you the
best. It is apparent that you are going to have many challenges as this
moves forward so we wish you the best.
Our next program is scheduled for April 24th when we will feature the
New England Regional Catastrophic Preparedness Initiative Cyber
Disruption Planning Project. They have pioneered building a cyber
disruption response capability in that area by incorporating information
technology into emergency management and public safety operations.
Please make plans to join us then.
Thanks to everyone for participating today and have a great afternoon! We are adjourned.