What is it?
In 2012, Congress adopted the Biggert-Waters Act (BW-12) to address the National Flood Insurance Program’s (NFIP) $28 billion deficit, which began with catastrophic claims during the 2005 hurricane season (Irene, Katrina, Rita and Wilma) and the 2008 season (Fay, Ike). The Act basically phases out federal subsidies on NFIP policies. Nationwide, approximately 19% of all NFIP policies will lose subsidies and be phased into standard-rated policies.
PreFIRM subsidies are the first to be phased out.
Changes effective Jan. 1 will impact nearly 7,900 residential or commercial policy holders in Lee County (4,200 in unincorporated Lee). These include non-primary residences, businesses, and properties which already had more than one flood insurance claim (repetitive loss properties). As their policies are renewed, they will begin to pay the unsubsidized rates with 25% increases annually until the full-risk rate is reached. It is not uncommon for residential policies to increase $1,000 or more, and for commercial policies to increase $10,000 or more in the first year due to Biggert-Waters.
If a PreFIRM policy became effective on or after July 6, 2012, the full-risk rate applies at the first renewal on or after Oct. 1, 2013. These are the policies doubling or tripling in cost – or rising even more. In addition, any new PreFIRM policy written after Oct. 1, 2013, must be written at the full-risk rate. In this category, there is no distinction between primary, non-primary and business.
PreFIRM subsidies protected owners of property that does not meet base flood elevations (BFE) because they were built before the first Flood Insurance Rate Maps (FIRMS) established base flood elevations here. The base flood elevation is the water level height expected in a catastrophic flood. For unincorporated Lee County, Bonita Springs, Fort Myers Beach and Fort Myers, the PreFIRM date is 1984. In Sanibel Island it’s 1979; and in Cape Coral it’s 1981.
Owners of primary residences, whether single-family homes or condo units, will lose their subsidies when there is a change of ownership or policy lapse. This will eventually affect another 10,600 policy holders in Lee County (6,930 in unincorporated Lee County).
The Federal government requires a flood insurance policy for any mortgaged property in the Special Flood Hazard Area, which includes A, AE and V zones. Therefore, anyone buying or selling residential or commercial structures in these zones will immediately be affected. All new policies are being written without subsidies.
Eventually, at least 30,700 current NFIP policy holders in Lee County (17,800 in unincorporated Lee County) will be affected by losing subsidies related to base flood elevations.
Bills have been introduced in Congress to delay implementation of this new Act to study its affordability.
Learn more about Biggert-Waters: