Our Own MCC Chair Joe “Flood” Rossi in USA Today: “Risk Rating 2.0 is a real positive change”
FEMA’s new rating methodology called “Risk Rating 2.0” will change the way FEMA rates properties for risk of flood loss. It is slated for implementation October 1st, 2021.
For many years, the MCC has been discussing how this new methodology by FEMA will change flood insurance rate structures by introducing the use of numerous data points, property characteristics, and risk analytics to redefine how we understand risk of flood loss.
Some may already have heard that Risk Rating 2.0 will cause flood insurance rates to go up dramatically and wondering if this is true. Well, the answer is yes, no and maybe.
As cited in the USA Today, article, “First Street Foundation suggests hundreds of thousands of homeowners in the riskiest locations across America could face massive rate hikes starting in October.”
This research group “estimates the average rate needs to more than quadruple on the nation’s most flood-prone homes under the ongoing effort to make the federal flood insurance program solvent and ensure homeowners most at risk are paying their fair share.”
The MCC is here to tell you, “DON’T PANIC”.
Under Risk Rating 2.0, some property owners could actually see reductions in the cost of flood insurance. Others will see increases, but likely not all at once.
FEMA said rate reductions would take effect immediately upon Risk Rating 2.0’s implementation. Rate hikes would be phased in slowly – a maximum 18% increase per year – for existing policyholders. Those buying insurance after Oct. 1 would pay full risk rates.
“NFIP premiums also may be higher after adding in fees or operating costs. Or they may be lower if a homeowner increases their deductible or obtains discounts for flood protection measures. FEMA caps payouts for structural damage at $250,000 regardless of a home’s value. Those watching FEMA also say a lot can change between now and October.”
In the USA Today article Joe states “I personally think Risk Rating 2.0 is a real positive change. I say we’re in uncharted territory because this is the first time in 52 years that the NFIP has made this big of a change.”
The MCC was founded in 2012 to provide education and guidance on flood insurance changes that are both programmatic and legislative. This change will once again be an opportunity for the MCC to help educate stakeholders. The MCC is working on getting regular updates on the state of Risk Rating 2.0 implementation and provide accurate information to our members.
Please be sure to read the full articlehereand reach out to us with questions you may have by emailing us at info@knowflood.org
Rest assured that the MCC will continue monitor development of Risk Rating 2.0 and keep you, our members, and the public informed.
Have you listened to our Podcast recently? The MCC releases one podcast a month called the Know Flood Newscast. We take relevant topics in the news and from our newsletter and discuss them with national and local experts. Here are some recent and planned podcasts:
-Know Flood Newscast Episode 11 – Merrie Inderfurth “[Risk Rating 2.0] will play a role in how [congress] moves forward”:
Did you know that there are more than 150 federal programs that in some way impact flood issues? Merrie Inderfurth, Legislative Liaison for the Association of State Floodplain Managers (ASFPM) and the National Flood Association (NFA) tries to keep tabs on all of them as well as the current legislative climate, recent bills that have passed and not passed, and the future of flood legislation.
With the dramatic changes in Washington DC, especially with the Democrats controlling both houses of congress and the presidency, we can expect potential for sweeping changes to US policy. According to Merrie, there could be a new resiliency agency created at the White House that would coordinate flood issues across all agencies. Also, new senate committee chairs appear anxious to move forward with flood legislation. But how will this affect flood legislation in 2021 and beyond? It’s one of the most pressing issues facing flood insurance stakeholders. Joe and Tim talk to, about Merrie points out, “Maxine Waters plans to move very quickly to introduce flood insurance reform legislation”. Listen to this very special, and current, legislative update.
-Know Flood Newscast Episode 12 – Chris Greene (The Flood Insurance Guru) “In all 750 videos, all videos are filmed on location”:
A common theme from most of our guests have been the idea of flood insurance education. From lenders, insurance agents, to real estate professionals and community officials. Flood insurance and mitigation education affects all of us. Chris Greene, otherwise knows as the Flood Insurance Guru is an expert in flood insurance education, advocacy and knowledge. With his poop hat, pig hat or other prop, Chris entertains and educates with almost 1,000 flood education videos and podcasts. As Chris says about his pig hat, “The reason I bought that one is because people say my house will flood when pigs fly. Well guess what, pigs are flying”. Chris discusses what he does, the critical importance of flood education, and why he’s knows as the “Flood Insurance Guru”.
New Private Flood Rule Offers Hope And Raises Concern
In late 2020, the Department of Housing and Urban Development (HUD) released its proposed rule to accept private flood insurance for Federal Housing Administration (FHA) insured loans. Currently, FHA is one of the few lending programs that does not accept private flood insurance on properties in high risk flood zones. FHA currently only accepts flood insurance through the National Flood Insurance Program (NFIP). Lenders, real estate agents, insurers, first-time homebuyers and others who use FHA for a mortgage have been waiting for FHA to begin to accept private flood policies. While the announcement of the FHA proposed rule made headlines and brought hope to many, the proposed rule as written is also causing concerns. Among the concerns are issues around the “compliance aid” and whether an FHA lender “may” or “must” accept a private flood insurance policy. Industry has responded to HUD in a strong way. The way that HUD responds in its final rule later this year will impact the effectiveness of the FHA private flood acceptance rule.
“Thinking of Doing A Home Improvement on a Home In a Flood Zone? Better Know The 50% Rule.
If you’re considering improving or repairing your floodplain home, you should know about “the 50% rule.” This term refers to an activity better known as “Substantial Improvement.”
If your home is located in FEMA’s 1% chance floodplain, and you’re planning to do work of a cost that might come close to equaling 50% of the structure’s value, you’ll need to check with your building department to see if you’ll be conducting a Substantial Improvement. If so, you might need to bring the entire structure up to current code with regard to flood-resistant standards. In plain English, this might mean that you’ll have to abandon a basement, elevate the entire structure, or change the foundation type altogether. In addition to the people in the building department, you might also consider consulting with a local architect or engineer familiar with floodplain construction.
“Your Map Is How Old?!
Flood maps are constantly being updated. The age and accuracy of the flood map used in your community can greatly affect if you need and how much you pay for flood insurance.
Under the National Flood Insurance Program, FEMA is responsible for mapping all the floodplains of the nation, which is a huge undertaking both in time and money. Each FEMA Region decides what they can afford to do with the money they’re given.
Here in Region I, most recent efforts have focused on remapping coastal areas since that’s perceived as the greatest flood risk. That’s why in most of eastern MA, you’ll see map dates of between 2009 and 2016.
In western MA the maps in use are from the 1970’s and 80’s maps, so FEMA’s current work load includes bringing those maps up to 21st century standards. These Western MA maps not only need to be updated, but also be digitized for electronic format. Over the next 3 to 5 years all MA flood maps should be available online in a digital format. For more information about your flood maps, you can contact your local planning department.
Properties with repetitive losses often have a relatively higher premium. To examine the flood risk of a property, check the FEMA maps and other local flood risk maps developed by the community.
Going forward, the MCC will include commentary in each newsletter from Massachusetts NFIP Coordinator, Joy Duperault. These ideas are great reminders no matter where you live!
Sue’s Flood Real Estate Tips
Oceanfront Property? Storm proofing your building is critical.
My clients purchased a beautiful ocean front property in Scituate. The builder left it up to the new owners to select and complete the exterior weather proofing for the property. This information will help you through the process.
When you purchase a beach house you must install weather protection in order to protect your investment. The windows and sliders facing the water and force of the wind must be covered for the storm season. The windows should be hurricane strength and covered on the exterior for the proper protection you need.
There are so many excellent options to choose from today. If you are on a budget and the DIY type, you can opt for plywood as a low tech, no frills option. Make sure you verify the best width for the wood and get the correct screws to install.
There are a variety of storm shutters to choose from. Made from aluminum or steel they cover beyond the frame of the window or slider. They can roll down from the top or side, they can fold or be hinged. Manual or electronic options are available. If you travel a lot, you may prefer electric storm shutters accessible from an app on your phone letting you operate them from wherever you are!
Remember of course these options will put the house into complete darkness. You may opt instead for clear polycarbonate panels, the same material used in hockey rinks. This type of covering allows light to stream in at all times. You can sit back and watch the storm without the fear of breaking glass.
I strongly suggest hiring a professional to install these. There are so many choices, it’s easy to get the quotes and details you need to make the best decision for your lifestyle and budget. This is truly not a good DYI project. You don’t want to realize they are not installed correctly during your first nor’easter!
I also suggest you get to know your neighbors. Ask around to see what they have installed for protection on their homes. This information will certainly prove to valuable. Let them share the lessons and mistakes they have made over the years, so you don’t repeat them.
Ever wonder why the decking along oceanfront homes have cut out hatches in the floors?? The hatches are typically hinged from below for easy removal. They are specifically cut out and removed during inclement weather, or for the season. This allows for easy water flow through the decking area, lessening any damage that can occur. When the deck is one solid piece it causes the water to slam against it with such force it will cause much more significant damage or demolition.
I hope these helpful tips allow you to properly safeguard your beach house. Now sit back and enjoy the view!!
FEMA Places Reinsurance in 2021 What is Reinsurance? Think of reinsurance as insurance for insurance. Reinsurance is an important risk management tool used by insurance companies to protect themselves from large financial losses.
This placement continues FEMA’s effort to stabilize the financial standing of the NFIP.
FEMA has purchased reinsurance for the National Flood Insurance Program (NFIP). FEMA transferred $1.153 billion of the NFIP’s financial risk to the private reinsurance market throughout 2021.
FEMA paid a total premium of $195.8 million for the coverage.
FEMA Releases Updated NFIP Technical Bulletin 3 and 6 That Focuses on Dry Floodproofing FEMA Technical Bulletins (TBs) provide guidance about how to comply with the National Flood Insurance Program’s (NFIP) minimum floodplain management requirements for building performance.
NFIP Technical Bulletin 3, Requirements for the Design and Certification of Dry Floodproofed Non-Residential and Mixed-Use Buildings in Special Flood Hazard Areas in Accordance with the National Flood Insurance Program DOWNLOAD HERE
NFIP Technical Bulletin 6, Requirements for Dry Floodproofed Below-Grade Parking Areas Under Non-Residential and Mixed-Use Buildings in Special Flood Hazard Areas in Accordance with the National Flood Insurance Program DOWNLOAD HERE
Tim’s Flood Savings Tips Risk vs Cost: What Should You Do to Manage Your Flood Policy and Reduce Cost?
Put risk and premium (money) in a blender and you have your answer!
We all know it is not that simple. But risk and premium are functions of each other: they both rise or fall together.
Here are some things to consider:
Saving Money:
most insureds’ big focus seems to be on minimizing cost. Minimizing risk can accomplish that. Reducing risk usually reducing your premium. So here are some options:
Elevating a property is an obvious and expensive option but shrinks a flood policy down to size.
Adding flood vents often pay for themselves quickly, sometimes even in less than a year, leaving a future of savings ahead.
Adding to the adjacent grade – building up the soil around a dwelling – can reduce your premium by fending off more water. Maybe it levels off the property, improving the yard as it simultaneously reduces cost.
Filling a sub-grade crawlspace or basement acts like an elevator for the building. As a typical basement is 8 feet below ground, or negative 8 feet, any amount of filling in a basement reduces premium by reducing the amount of water that can flow into it. For example, a 7-foot basement is already one foot taller than an 8-foot basement, i.e., the house is one foot higher in its flood plain.
Reducing coverage also reduces premium:
Increasing your deductible can offer savings, but also adds risk to you – lower payout in the event of a claim.
Matching your coverage to your loan balance under $250,000, saves in premium cost. (It also has the potential for you having greater exposure in the event of an actual flood.) But this option may meet your needs
Similarly reducing your contents coverage can save on your premium, but contents rates are lower than dwelling rates, so savings are proportionally smaller than dwelling.
Going private:
In many cases, a non-FEMA policy can save you money while not compromising on coverage. Private flood providers can determine their own risk for a given dwelling, often with surprising results. However, those with private insurance can face potential cancellation while the NFIP will not cancel a policy holder.
Both private and NFIP policies can experience premium increases, but we can more easily predict the rate of increase for a NFIP flood policy.
Some thoughts on flood coverages…
Note from the Chair
When we ended 2020, many had hopes of a change; a change in our pandemic, the economy, our ability to go to a restaurant with friends and no masks. But one change the MCC had been talking about for some time is the changes coming to the NFIP in 2021. This year will see momentous changes to NFIP rating, legislative changes, and more. As our headline article reads, don’t be panicked. For almost 10 years, the MCC has built a reputation for helping and educating the public, politicians, civil servants, and our other stakeholders with major changes to the flood program.
This time is no different. Only now, the MCC is more capable than ever to provide education, and help you find answers to your questions. We also are working hard to lobby for changes in coastal development and flood policies that will benefit not just our members, but the entirety of the Commonwealth. There are a lot of unknowns, even for us. But we will be here to educate, advocate, and inform, just like our mission statement says.
Joe Rossi
Chair and Executive Director
Massachusetts Coastal Coalition
