Rising Flood Insurance Premiums Come for Some This Year

WILDWOOD CREST – Like the waters that rose around them as storms passed through Cape May County, some homes and their owners, will find rising flood insurance premiums hitting them in the face this year.
During a Jan. 10 meeting between FEMA (Federal Emergency Management Agency) representatives and leaders of local municipalities, local municipal representatives were told owners of non-primary residences built before 1968 would begin paying a 25 percent increase in their flood insurance premiums effective Jan. 1 to offset a federal insurance premium subsidy they have been enjoying for many years.
Under the recently enacted Biggert-Waters Flood Insurance Reform Act of 2012, a key provision calls for the phase out of subsidies for second homes. Pre-FIRM structures are defined as those structures built prior to 1968 when Federal Insurance Rate Maps FIRM) were created. Up until this year, owners of pre-FIRM primary and non-primary residences were given a subsidy to their flood insurance premiums. No more, said the government.
According to Ed Curtis, a coastal engineer for FEMA, the subsidized rates for non-primary type residences will be phased out. “It’s not all pre-FIRM structures, just those that are non-primary.”
Curtis said the pre-FIRM structures have paid an “artificially low annual flood insurance premium that does not reflect the true risk of that structure because it’s located on our map in a special flood hazard area.”
He gave the example of a Victorian house sitting in a V flood zone.
“The pre-FIRM subsidized rates are going to be phased out over multiple years,” he told the Herald. “Starting this year, when that property owner renews their policy, their premium will increase 25 percent for pre-FIRM structures.”
Curtis said owners of older secondary homes had not been made aware of the increase in coverage. He noted the increase had nothing to do with Hurricane Sandy or the new regulatory flood maps being prepared.
“They are still being rated for insurance premium purposes based on the map that is currently in effect in Cape May County.
When asked who is currently funding the flood insurance premium subsidies, Curtis responded, “The American taxpayer.”
He explained the flood insurance program is run like any other insurance company. “We charge premiums for coverage and we pay out claims based on the amount of money we take in in premiums. On an average year, that balances out.” He continued to explain in years where there are historic flood events, like Hurricane Katrina or likely Hurricane Sandy, the premiums will not cover the damage claims.
“By phasing out subsidized premiums and rating the premiums based on the true risks, in other words getting to an actuarial flood insurance rate that is more likely to make the program more solvent,” Curtis explained.
The premium increase will be based on the current year’s premium. “And we’ll add 25 percent to that,” said Curtis.
Properties may also see an increase in premiums from flood mapping rezoning. FEMA has prepared Advisory Base Flood Elevation (ABFE) maps for the county. Based on the suggested maps, properties may find themselves in different flood zones that located before.
Those maps, while not the regulatory maps that will go into effect in two years, define base flood elevations. Flood insurance premiums will dovetail with property’s compliance with the new base flood elevations.
Premiums will also go up for homeowners whose homes were built after 1968, said Curtis.
“I would say all of them (are increasing),” said the engineer. “Either as a result of the phasing out of the subsidies or the updates to flood insurance rate maps that will occur over the next several years. The first incidence will be the new coastal maps for the New Jersey coast.”
“If you rebuild to pre-flood conditions, your flood insurance premium could increase dramatically in the future,” stated FEMA. In a handout, the example of a flood insurance premium for a $250,000 structure built 4 feet below base flood elevation is noted at $9,500 per year versus a structure built at 3 feet above base flood elevation is shown to cost $427 per year.
While municipalities throughout the county are scrambling to help property owners rebuild and renovate after Hurricane Sandy, those municipalities on the bayside have been left to their own devices to assist homeowners in building at a safe elevation. FEMA’s ABFE maps do not include those towns on the Delaware Bay, leaving several towns without information about flood levels.
Del Haven, which sits in an A zone on the current regulatory maps, does not sit in a flood zone on the ABFE map.
“Why isn’t Del Haven considered in a flood zone?” asked a representative of Middle Township.
“We did not produce advisory maps for the Delaware Bay,” responded Curtis.
With several towns along the bay devastated by Sandy’s wrath, Curtis said he had been questioned by several municipalities as to the exclusion of the bayside towns.
Curtis said his suggestion to both Middle and Lower Townships was to have a FEMA representative address the local governments regarding why the bayside was not included.
He added the bayside will be included in the regulatory maps, just not on the advisory maps.
“I have people who want to build now,” said James Neville Lower Township Councilman. “And we’re guessing on a flood height. I’m telling them I’m guaranteeing them it’s a V-zone. I’m telling them the higher they go the better they are.”