WASHINGTON – March 5, 2015 – A bulletin released by the National Flood Insurance Program (NFIP) outlines changes in flood insurance rates after April 1, 2015, that are allowable under a law passed last year – the Homeowner Flood Insurance Affordability Act (HFIAA) that changed some details of the Biggert-Waters Act.

Both HFIAA and Biggert-Waters are complex documents, and it's important to note that it's difficult to know from general information how much a specific homeowner's flood insurance policy could change.

For more information on categories of homeowners and how they might be affected, download the complete NFIP bulletin posted online.

Key changes

  • An individual's rate premium cannot increase more than 18 percent; an "average rate class" of homeowners cannot have their premiums increase more than 15 percent.
  • Certain subsidized policyholders (those not currently paying the full actuarial rate) have mandatory rate increases.
  • Policies will have a new annual surcharge required under HFIAA.
  • New guidance will impact "substantially damaged and substantially improved structures," and there is additional rating guidance on Pre-Flood Insurance Rate Map (FIRM) structures.
  • There will be a new procedure for Properties Newly Mapped into the Special Flood Hazard Area and existing Preferred Risk Policy Eligibility Extension (PRP EE) policies.

The changes take effect April 1 for both new business and renewals.

According to the bulletin, the 18 percent cap on flood insurance increases has a few exceptions that include, but are not limited to, misratings and increases in the amount of insurance coverage.

Another exception: Premiums on subsidized policies will increase 25 percent for policies on non-primary residences, Severe Repetitive Loss properties, and substantially-damaged/substantially-improved properties.

A 25 percent premium increase on business properties will be implemented in 2016.

New surcharge

HFIAA also introduces a new mandatory surcharge on all new and renewed policies – $25 for primary residences and $250 for all other policies.

The surcharge and a Federal Policy Fee (FPF) aren't considered premiums, so they're not considered in the maximum 18 percent increase for any specific homeowners. As a result, the total amount charged a policyholder could exceed 18 percent in some cases.

Premiums – including the Reserve Fund Assessment but excluding the FPF and the new HFIAA- mandated surcharge – will increase an average of 9.9 percent for policies written or renewed on or after April 1, 2015.

When the FPF and the new HFIAA-mandated surcharge are included, the total amount charged to a policyholder could increase a maximum of 19.8 percent.

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