EM Forum Presentation — April 10, 2013

Flood Insurance Reform and Modernization
Implementing the Biggert-Waters Act of 2012

David L. Miller
Associate Administrator
Federal Insurance and Mitigation Administration

Kristin E. Cormier Robinson
Senior Advisor
Federal Insurance and Mitigation Administration

Amy Sebring
EIIP Moderator

This transcript contains references to slides which can be downloaded from http://www.emforum.org/vforum/FEMA/B-Wupdate.pdf
A video recording of the live session is available at http://www.emforum.org/pub/eiip/lm130410.wmv
MP3 format at http://www.emforum.org/pub/eiip/lm130410.mp3
or in MP4format at http://www.emforum.org/pub/eiip/lm130410.mp4

[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.


[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]

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.

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.  

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Michelle Brock: Will policy holders within CRS communities continue to receive the discount associated with the community's CRS rating?

David Miller: Yes.

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.

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.

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.

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


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.