january 9, 2014 1 · 4 key total reports = 1687 red—tornadoes = 113 green—hail reports = 347...
TRANSCRIPT
January 9, 2014 1
www.nc-20.com 2
Territory Territory Definition CURRENT RATE % FILED RATE FILED $ DIFFERENCE
7 Currituck, Dare & Hyde
$1,613 35.0 $2,178 $565
8 Brunswick, Carteret, New Hanover, Onslow & Pender $1,823 35.0 $2,461 $638
48 Currituck, Dare, Hyde & Pamlico
$1,021 9.8 $1,121 $100
49 Beaufort, Camden, Chowan, Craven, Jones, Pasquotank, Perquimans, Tyrrell & Washington
$871 7.8 $939 $68
52A Brunswick, Carteret, New Hanover, Onslow & Pender
$1,140 35.0 $1,539 $399
52B Brunswick, Carteret, New Hanover, Onslow & Pender
$1,140 -2.7 $1,109 $-31
North Carolina 2014 Homeowners Filed Rate Revision by Territory
Per $75,000 Amount of Insurance Protection Class 1 -5
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Territory Territory Definition
Full Peril (Wind
Included) Homeowners
Policy Filed Rate
Full Peril Rate with
1.15 NCIUA
Surcharge Factor
HO Fire/Liability
Portion of Filed Rate
Wind Only Filed Rate
Wind Rate with 1.05
NCIUA Surcharge
Factor
7 Currituck, Dare & Hyde
$2,178 $2,504.70 $293 $1,885 $1,979.25
8 Brunswick, Carteret, New Hanover, Onslow & Pender
$2,461 $2,830.15 $287 $2,174 $2,282.70
48 Currituck, Dare, Hyde & Pamlico
$1,121 $1,289.15 $120 $1,001 $1,051.05
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Beaufort, Camden, Chowan, Craven, Jones, Pasquotank, Perquimans, Tyrrell & Washington
$939 $1,079.85 $280 $659 $691.95
52A Brunswick, Carteret, New Hanover, Onslow & Pender
$1,539 $1,769.85 $267 $1,272 $1,335.60
52B Brunswick, Carteret, New Hanover, Onslow & Pender
$1,109 $1,275.35 $293 $816 $856.80
Rates are based on $75,000 dwelling value coverage, HO-3 policy, frame construction.
North Carolina Rate Bureau 2014 Homeowners Insurance Rate Filing
Impact on NCIUA (Beach Plan Policies) Full Homeowners and HO Wind Only Policies
www.nc-20.com 4
KEY
Total Reports = 1687
RED—Tornadoes = 113
GREEN—Hail Reports = 347
BLUE—Wind Reports = 1226
Rates for $75,000 of HO Coverage:
1993 2014(filed)
Charlotte $ 351 436
Gaston, Mecklenburg, Union 350 436
Ashe, Buncombe, Burke 312 431
Alamance, Guilford, Davidson 350 477
Currituck, Dare, Hyde (obx) 578 2,178
Currituck, Dare, Hyde mainland 417 1,121
www.nc-20.com 5
Flood Insurance
The Impact of the Biggert-Waters Flood Insurance Reform Act of 2012
July 27, 2012
www.nc-20.com 6
DHS – Department of Homeland Security
FEMA – Federal Emergency Management Agency
NFIP – National Flood Insurance Program www.fema.gov; www.floodsmart.gov; www.ncfloodmaps.com
FIRM – Flood Insurance Rate Maps www.Region2Coastal.com
Pre-FIRM – prior to effective date of Flood Maps
SFHA – Special Flood Hazard Area
CRS - Community Rating System
BW-12 –Biggert-Waters Act of 2012
WYO – Write Your Own Companies, 90 in US that write flood insurance through NFIP.
*NMG – No More Grandfathering
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BFE – Base Flood Elevation
V-Zones: Coastal high-velocity zones
A-Zones: Non-velocity zones, which are primarily riverine zones
X-Zones: Zones outside the Special Flood Hazard Area.
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“the most costly and prevalent natural disaster risk in the United States…”
1968 – Post extreme flooding events, Congress authorized the NFIP to reduce property losses from flood peril and public spending to compensate disaster victims. Private insurance companies were not willing to write coverage for flood risk.
National Flood Insurance Act of 1968 mandates that coverage be widely available and affordable.
FEMA administers NFIP and sets rates based on 100-year floodplain of potential flood hazards.
52% of US population lives within 50 miles of a watershed area. (NOAA)
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Flood insurance required on federally backed mortgages.
22,000 communities in ALL states and territories participate in the NFIP
5.6 million policies
$1.2 trillion in exposure (structure and contents).
2012 premiums: $3.5 billion
NFIP not required to have statutory reserves.
From 1978 thru 2012, the NFIP has collected $6 Billion more in premium than claims paid.
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WYO Program created in 1983. Allows companies to write and service the NFIP in their name without bearing the risk.
Ninety private WYO companies write policies, and process, settle, pay and defend all claims.
More than 1/3 of NFIP premiums collected goes to WYO companies and agents.
NFIP pays WYOs 15.6% of premiums as Expense Allowance (advertising, policy writing, general expenses, etc.); a 15% Commission Allowance; an add’l 2% if WYO meets 5% net growth in policies; Post-flood event – NFIP pays claims adjustment expenses PLUS 3.3% of each claim settlement for processing expenses. (This was adjusted after Katrina to prevent windfall to companies)
FEMA does not know how much paid to WYO companies covers expenses vs. how much is profit.
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Financially sound for over three decades. Successful in enacting local floodplain
ordinances & compensating property owners for flood loss.
2005 – Hurricanes Katrina, Rita and Wilma $$$ ◦ Forced NFIP to borrow $21 Billion from US Treasury
Program’s insolvency blamed on four major flaws:
Does not charge full risk-based premiums for all properties
Repetitive loss properties
Mapping – outdated
Residual risk properties – exempts properties behind flood-control structures (levees and dams).
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The Good News: Reauthorizes the NFIP for 5 years!
The Not-So-Good News: Four Major Reforms
Amendments to coverage, rate and premium structures.
Requirement for repayment plan and reserve fund.
Updates to Mapping Program. Amendments to eligible mitigation activities.
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Rates are based on BFE and flood zone.
BW-12 will make the NFIP more financially stable by raising rates to reflect true actuarial flood risk.
FEMA reports 78% of policyholders already pay actuarial premiums. True risk is debated. (CRS)
“Charging rates that fully reflect flood risk arguably would discourage development in the most risky areas.”
Consideration will now be given to historical loss data including catastrophic years and other factors such as coastal storm surge and climate change.
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Subsidized (discounted rates) removed from pre-FIRM non-primary residences. Rates will increase 25% a year until
actuarial rates achieved.
If your non-primary residence (lived in less than 80% of the year) was built prior to approximately
1974 and has had no major repairs or renovations, then the policy premium is most-likely discounted.
Only 20% of policyholders (approx. 1.1 million) pay
subsidized rates AND only 5% are second home policyholders.
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Average 10% overall rate increase. ◦ V-zones: post-FIRM 11%; pre-FIRM 17% ◦ AE-zones: post-FIRM 6%; pre-FIRM 16% ◦ X-Zones: Standard rated policies 8%; Preferred
risk policy (PRP) written under the PRP Eligibility Extension 19%; all other PRP, no change
Reserve fund (mandates $12 billion) - assessment of 5% for all policies – will be included in overall rate increases.
New Application Forms and Elevation Certificate requirements.
No extension of subsidy discount to new or lapsed policies for pre-FIRM properties in SFHAs. ◦ Does not apply to rollovers, transfers, or rewrites.
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Rates to increase 25% a year for other subsidized discounted:
Commercial properties.
Severe repetitive loss properties (more than 4 claims).
Properties that have incurred flood-related damages where claims payments exceed fair market value.
Full risk rates will also apply to policies written for newly purchased property.
◦ Effective for renewals post 10/1/2013 of subsidized discounted properties if purchased after July 6, 2012.
◦ Does not apply to gifts, transfers of ownership, or assignments to estate or trust in which purchase did not take place. (LLCs)
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Severe Repetitive Loss Properties (RLPs)
Disproportionate large share of all claims.
Approximately 1% of all NFIP properties historically account for over a third of claims paid.
90% of RLPs Pre-FIRM
NC RLPs – through 2011 ◦ $474.5 million in claims paid
◦ 24,136 claims on 8,664 properties
◦ Average payment per claim $19,658.17
◦ Total average payment per property $54,709
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Premium rates for other properties, including non-subsidized discounted properties, will increase as new or revised flood insurance rate maps become effective. Full risk rates will be phased in for these properties. You will no longer be allowed to continue to pay to the zone and elevation in place at time of construction. Your primary residence could be affected!
NO More Grandfathering!
“Even if you build to minimum standards today, you will be subject to significant rate increases upon
remapping if your flood risk changes in the future.”
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Increases the limit for annual rate increases from 10% to 20% per year.
Allows for premium payments – either annually or in more frequent installments.
Lenders will be required to escrow payments and will be in control of claim payments to ensure repairs are made.
Increased deductibles: pre-FIRM up to $100,000 of coverage - $1,500, pre-FIRM over $100,000 - $2000
Post-Firm deductible: up to $100,000 - $1,000, over $100,000 - $1,250
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Revised flood maps are due from NFIP in 2014. NC Floodplain Mapping Program estimates Dare’s preliminary maps will be released July 2014.
There will be a new mapped zone – the “Coastal A Zone”. ◦ Behind the V zone and other areas that experience
a limit of wave action 3 ft. to 1 ½ ft.
◦ Could affect all soundfront property owners.
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Establishes a Technical Mapping Advisory Council that would advise FEMA on improving accuracy; on standards that should be adopted for flood maps, data and map maintenance; and on funding needs and strategy which could include the purchase of reinsurance.
TMAC to develop recommendations for future conditions, including impacts of sea level rise, to determine rates. “The reforms will help communities looking to
adapt to climate change. “
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Be proactive and contact your insurance agent. Ask how the changes are going to affect your policy. Check your dwelling value!
Get a new elevation certificate to determine base flood elevation. This determines your rate.
Higher deductibles might lower your premium
“Consider Remodeling or Rebuilding” – build higher, add vents to foundation or use break-away walls.
Community-wide mitigation steps?
Provide input and feedback! [email protected]
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Second Home Debate – MOOT POINT! ◦ Second Home Pre-FIRM policies only make up about 5% of
total NFIP policyholders. ◦ Second Home policyholders do not have Replacement Cost
Coverage – they only have ACV coverage. ◦ Taxpayers are NOT Subsidizing Flood Insurance for BIG Second
Homes/Vacation Homes.
The definition of NFIP SUBSIDY. The amount of additional premium revenue BW-12
would generate. The amount of interest NFIP policyholders have paid on
the debt from Hurricane Katrina. The detrimental impact of BW-12 on middle class
mortgage holders. ◦ Unable to pay exorbitant premium, unable to sell, foreclosure ◦ Lower market value, decreased local tax revenues
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Regardless of the size of the structure, the NFIP residential
structure policy limit is $250,000.
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Pre-FIRM oceanfront Motel in Kill
Devil Hills. Owner will start seeing
a 25% increase in rate a year until
the actuarial risk rate is achieved.
Owner currently pays $5,600 a
year for flood insurance. To find
out what his ultimate premium
would be once phased in, he
asked his agent what a new
owner would have to pay if he
sold the property. The owner
was told the premium would be
approximately $55,000.
The Senate will likely vote next week on
S. 1846 - Flood Insurance Affordability Act This bill would delay the loss of grandfathering and other burdensome provisions of BW-12 for 4 years.
Call NC Senators and tell them to support this bill!
SENATOR RICHARD BURR (202) 224-3154
SENATOR KAY HAGAN (202) 224-6342
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Willo Kelly
President, NC 20 www.nc-20.com
Government Affairs Outer Banks Home Builders Association
Outer Banks Association of Realtors
[email protected] (252) 202-7927
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