National Flood Insurance Program: Re-authorization

An extension of the National Flood Insurance Program (NFIP) was signed into legislation by the President and passed by both houses of Congress on February 9th, 2018. This extension guaranteed that FEMA would retain its ability to provide new federally backed insurance policies as well as renew policies for millions of properties across the country.  Once again faced with a deadline, Congress must reauthorize the NFIP no later than 11:59 p.m. on March 23rd, 2018.

While a lapse in NFIP authorization is rather unlikely, it is important to identify potential implications should it occur. In the event of a lapse, FEMA would retain the ability to ensure the payment of valid claims on existing policies with the program’s remaining funds. A non-renewal, however, would end the NFIP’s ability to sell and renew policies around the country. Banks and other lending institutions would, potentially, be hesitant to approve mortgages since they will not have the security of federally backed insurance. An estimate by the National Association of Realtors places the number of home closings impacted by an NFIP lapse at somewhere around 40,000 per month.

The burden would then be transferred to the private market to fill the void, which carries its own set of potential risks. First and foremost, it would end up taking money away from the NFIP whenever it did get renewed. Less NFIP policies means less money in the system which could make it even harder for the program to pay claims. Private market insurance also carries with it the potential risk of higher insurance premiums as well as being less regulated than the NFIP.

One of the best ways to protect yourself is to ensure you have an accurate, certified, and insured MyFloodStatus Flood Determination. Knowing your true flood risk will enable a homeowner to properly insure themselves if an NFIP lapse does occur. Flooding will happen, but incorrect determinations should not. Learn how our low-cost, structure-based reports help you confirm, challenge, KNOW the true flood status.

Localized Flooding: Classifying ‘Superstorm’ Sandy

Hurricane Sandy, often called by its unofficial name ‘Superstorm Sandy’, impacted the northeastern United States in the fall of 2012. In its wake it left an estimated $75 billion in total damage. The long-term effects of the storm are not solely limited to the loss of life and property damage experienced; storms like this also tend to change people’s perception of risk. Sandy is often used as an impromptu measurement of a property’s likelihood of flooding. In our experience, it is often cited by the flood industry, real estate professionals, and the general public alike when expressing concerns related to flooding, i.e. “the house didn’t flood during Sandy, therefore it is impossible that I’m in a Special Flood Hazard Area”. This statement, while not necessarily 100% accurate, uses logic and personal experience to arrive at a conclusion based on common sense:

A historic storm event occurred + the structure didn’t flood= I must not be in a special flood hazard area.

This may be true for some structures but, unfortunately, it is not true for all. In order to be a better resource for our clients it was important for us here at WTG to help explain why that is. Where does the discrepancy lie and how can we better educate ourselves and, by extension, anyone who uses our services? To that end, one of our Certified Floodplain Managers conducted a detailed analysis of the data from Hurricane Sandy. The findings provide a clearer picture of the storm’s characteristics and shed some light on the variables that contributed to flooding and non-flooding that occurred.

Did Sandy meet the criteria to be classified as 100+ year flood event?

Simply put…yes & no. Storms can be very large in comparison to the of flooding events they cause, meaning that many more people experienced Hurricane Sandy than those who experienced a 1% annual chance flooding event (100 year flood). The majority of flooding that resulted from Hurricane Sandy was caused by its storm surge, which mainly impacted bay and coastal communities.

What did we find?

Hurricane Sandy Peak Flood Elevation Points were obtained from the USGS. Those points were then compared to the coastal Base Flood Elevation (BFE) that the point fell within. Much of the Jersey Shore, The Raritan Bay, Hudson River, and South Side of Long Island NY experienced large-scale flooding exceeding that of the 100-year flooding event elevation, conversely there were regions that did not.

We found a large difference between Hurricane Sandy’s peak flood elevations and the FEMA BFEs in Waackaak Creek and Thrones Creek in Monmouth County. Peak flood elevations for Hurricane Sandy in these areas were recorded at nearly six feet below the BFE. This does not mean that those creeks did not overflow their banks. They certainly did, causing homes to flood, but the flood elevations did not exceed FEMA’s 1% annual chance flooding (100-year flood) elevations probably in large part due to a levee protecting the two creeks from the storm surge in the bay. This levee would have been less helpful in a torrential rain event which is different from a storm surge.

Only a few miles away however, an area between Flat Creek and East Creek in Union Beach Borough did experience flood water elevations which exceeded the BFE. These differences are more than likely due to combinations of local differences in the storm itself, local flood protections, local geography, and local topography.

In the graphic below, Union Beach appears on the left with West Keansburg on the right. The numbers in red represent Sandy’s peak flood elevation above the BFE. In the case of the 0ft label, Sandy’s flood elevation and the BFE were equal. The river associated with this flooding was East Creek. The tan numbers represent Sandy’s flood elevations below the BFE. The rivers associated with these water elevations were Thrones Creek and Waackaack Creek. The flooding in these two river systems reached a height almost 6 feet below the BFE. All three of the above-mentioned stream systems connect into the Raritan Bay.

(The BFE’s for this region ranged from (11-12 feet) The Sandy Peak Flood Elevation Points ranged from 5.1 feet to 13 feet)

 

Below is a full view of the USGS Peak Flood Elevations for Hurricane Sandy compared to the FEMA Base Flood Elevations. Tan represents Sandy’s peak flood elevations that were less severe than the FEMA 1% annual chance flood event (100-year flood), and the red represents Sandy’s peak flood elevations more severe than the 1% annual chance flood event. This graphic helps display how localized the 1% annual chance flood event (100-year flood) can be within an impacted area.

When dealing with terms and concepts that are unfamiliar, it is helpful to be able to put things in proper context. It is our hope that this analysis will offer some clarification and will help people understand that previous storms aren’t always a bullet proof indication of a structure’s vulnerability to flooding. While the term “100-year storm” can seem like, and is used as, a blanket term it is actually a very localized event. Each storm is different and there are many variables to consider when trying to make sense of storms and flooding.

Our goal here at WTG is to provide accurate, up-to-date, and easy to understand information regarding flooding, flood hazard, and flood events. If you have questions regarding this blog, any of our other blogs, or any flood related questions in general, give us a call at 855-653-5663 and talk a one of the Certified Flood Plain Managers who staff our Flood Resource Center.

Current State of the NFIP: Status, Issues, and Potential Solutions

The National Flood Insurance Program (NFIP) was set to expire on September 30, 2017 until President Donald Trump signed legislation reauthorizing the program for three more months. This gives Congress until December 8, 2017 to consider reforms to a program that is one of FEMAs most utilized tools when dealing with disaster relief caused by flooding. Past storms such as Katrina, Irene, Sandy, and most recently, Hurricanes Irma, Harvey, and Maria have renewed awareness in the NFIP.  Events such as these have made understanding the functions, issues, and pending expiration / potential renewal vital to industry and non-industry professionals alike.

What is the NFIP?

The NFIP was created by the Congress of the United States of America through the National Flood Insurance Act of 1968. The NFIP enables property owners in participating communities to purchase federally administered flood insurance.  Its purpose was to correct some of the shortcomings that were present in traditional flood control and flood relief programs.  The NFIP was created in order to:

  • Transfer burden
    • Move the costs of private property flood losses from the taxpayers to the floodplain property owners through flood insurance premiums.
  • Administer Financial Assistance
    • Provide residents and property owners in the floodplain with financial aid after flooding events, particularly smaller floods that do not warrant disaster aid.
  • Impose Sustainable Development
    • Guide development away from high risk flood zones.
    • Require that new and substantially improved buildings in a high risk zone be constructed in a manner that would minimize or prevent damage during a flood.

Why is the NFIP currently underwater?

NFIP premiums SHOULD reflect true flood risk. Historically, however, that was not the case. Any structure built before a community’s first Flood Insurance Rate Map was issued (i.e. a Pre-FIRM structure) received a subsidized premium; this policy had its consequences. Put simply, these “Pre-FIRM”, subsidized premiums are not high enough to cover flood losses on these structures. These artificially low premiums, along with multiple catastrophic storms in relatively short periods of time (e.g. Katrina, Rita, Wilma in 2005 and Harvey, Irma, and Maria in 2017) have put a big strain on the NFIP.   This strain, in the form of debt, has led to the program owing $25 billion to the U.S Treasury as of this writing. As more claims funnel into the system from Harvey, Irma, and Maria, the debt will only grow.

While recent legislation (Biggert-Waters Flood Insurance Reform Act 2012 & Homeowners Flood Insurance Affordability Act of 2014) has sought to right the ship, there is still a lot of work that needs to be done for the program to be solvent again.

Potential Reforms & Solutions

It’s clear that the NFIP is a very complex program and there isn’t one solution that will act as a fix all. This, coupled with the fact that many potential fixes may counteract each other, makes creating meaningful change a challenge.

For instance, from our intimate experience with the program, it seems that the subsidization of high risk structures (Pre-FIRM structures) and the push to private market insurance are its biggest liabilities.  The solutions to these issues, like others, also seem to work against one another. For instance, removing the subsidized premiums (already slowly happening as per the 2012 & 2014 legislation discussed earlier) will bring more money into the overburdened system, which is a good thing. However, the increase many homeowners are experiencing in their annual premiums is beginning to cause more inquiry into the private flood insurance market. In the end this would take money away from the program, so it’s a delicate balancing act.

Other possible solutions, like requiring flood insurance on ALL sales (or at least when the structure is within the 500 year floodplain), similar to home insurance, could potentially provide the NFIP with the funds necessary to ensure that all claims get paid by revenue from the system itself. The obvious issue and concern surrounding this approach being that it may not be received well by the public and cause backlash.

One thing is for certain, flooding will not stop and subsequent relief will always need to be available. Gaining some ground on our debt and getting the NFIP in a more solvent state is extremely important. It’s time that we really begin, as a nation, to delve into this problem and produce some real viable solutions.

WTG F.A.Q.

One of our main goals at Western Technologies Group is to provide as much comprehensive, useful, and accessible information as we can. Below are some of the questions that are frequently asked to our Certified Floodplain Managers and order operators at the Flood Resource Center.

What is a Flood Determination?

A Flood Determination is a document that provides and confirms the flood status of a specific structure. The WTG Flood Determination includes (i) the FEMA Standard Flood Hazard Determination Form that identifies the Flood Zone and states whether flood insurance is required under the NFIP. (ii) Visual verification in the form of imagery our experts use in their analysis. (iii) Flood Zone Legend, the color coded demarcations that correspond with FEMA flood zones (X, AE, V, etc.) (iv) Advisory/Preliminary maps (when available) so the property owner can have a ‘heads up’ to possible future changes in their flood zone.

What is the difference between a Flood Zone and a Special Flood Hazard Area (SFHA)?

When most people say “flood zone” they actually mean “Special Flood Hazard Area” (SFHA). An SFHA is any zone containing the letters “A” or “V”.  SFHA’s are the high-risk flood zones where flood insurance in required. All SFHA’s are flood zones, not all flood zones are SFHA’s.

Is this (my) structure in a flood zone?

Yes, all structures within a community that participates in the National Flood Insurance Program (NFIP) are in a flood zone. Determining what flood zone your structure resides in and if that zone is considered a SFHA are of paramount importance. Flood insurance is only required (by FEMA) when any part of your insurable structure is in a SFHA. This is what is known as FEMA’s Mandatory Purchase Requirement.

There is a high risk SFHA on my property but it does not touch my home: am I in a high risk zone?

Under the National Flood Insurance Program (NFIP) rules, you would not be in a high risk zone. If your structure is completely within a zone of minimal risk, X or X (0.2%), you are considered low to moderate risk and do not require flood insurance. However, our recommendation is that you get flood insurance for the added protection. The premium would be very low.

I heard there are new flood maps. Do you use the new maps for your Flood Determination?

The idea of ‘new maps’ vs. ‘old maps’ is a common misconception, the ‘old maps’ are the current, effective, maps that we use for our determinations and the ‘new maps’ are the Advisory/Preliminary Maps primarily used to help guide construction. The current, effective, maps are the only maps that can be used to determine if flood insurance is required. The ‘new maps’ are more accurately known as Advisory/Preliminary and cannot be used as the basis for a Flood Determination. Eventually, these Advisory/Preliminary maps (or some version of said) will be made ‘effective’, at which point they will be used for the basis of our Flood Determinations.

 Can an insurance company exceed FEMA’s mandatory flood insurance requirement?

Yes. FEMA’s requirements are the minimum requirements for flood insurance. If you have a mortgage, your lender has the right to require flood insurance no matter what flood zone you are in.

If a lender requires flood insurance regardless of my zone, will the premium be high?

No. Policies on structures outside the SFHA are called Preferred Risk Policies (PRP) and are usually hundreds of dollars as opposed to thousands.

 If I don’t have a mortgage is flood insurance required?

No. FEMA’s mandatory purchase requirement only applies to structures with mortgages. If you own the home out right, it is your prerogative to purchase flood insurance as you are assuming the full risk.

Will my mortgage lender or insurance company accept your report?

Yes. We are certified by FEMA to produce our flood determinations. Our clients include mortgage companies, title companies, banks, and insurance companies who trust the conclusion of our reports.

What if my bank, lender, or Mortgage Company doesn’t use WTG?

If your lender already has their own method of obtaining flood determinations, a situation may arise where our conclusion differs from theirs. In cases where conclusions differ, the next step is often hiring a surveyor to do and Elevation Certificate, and subsequently, getting a Letter of Map Amendment to resolve the issue.

If I am in an SFHA, can the designation be challenged or changed?

Yes, you can dispute the flood status of an insurable structure that is affected by a SFHA by way of a Letter of Map Amendment (LOMA). A LOMA is an official document issued only by FEMA stating the flood status of a particular structure(s). The first step in any LOMA application is to have an elevation certificate produced by a licensed land surveyor.

What is a LOMA?

A Letter of Map Amendment (LOMA) is a document produced by FEMA that changes the flood status of a structure. FEMA will compare structural elevations to the Base Flood Elevation (BFE) of the property. If the structural elevations are above the BFE, then the structure can be effectively removed from the SFHA and from the mandatory purchase requirement. FEMA is the only government organization that can issue a LOMA. Visit www.myfloodstatus.com to learn about this process.

 Can I use this report to sell my home?

Yes. Buyers like accurate information about a property they are purchasing. Real Estate Agents will often attach a copy of our Flood Determination to their MLS listing. This can make your property more attractive in a town or area that has a reputation for flooding if the structure is not contacted by a SFHA. Real Estate Agents can use our report to increase buyer interest/activity and to fully disclose any flood related issues.

 If my structure is in an SFHA, and I have no mortgage, should I obtain flood insurance?

It is always our recommendation that flood insurance be obtained if any insurable structure is near or in an SFHA. While you will incur the cost (insurance premium), you will also be covered should anything happen.

Why is our report better/more accurate than other Flood Determinations?

While there are other reputable companies out there that produce flood determinations, our experience is that we have a particularly exceptional and accurate report. The systems we have in place to identify the property and conduct an accurate analysis are the best that the industry has to offer. In addition, we offer our proprietary visual verification (in the form of screen captures), so the user/customer can see the data we used in the analysis and understand the method behind our determination. The report is also certified and insured. We stand behind our products.

If you have any questions, comments, concerns about any of the items mentioned here, or any other flood related questions feel free to contact the MyFloodStatus flood resource center at 855-653-5663 or visit us at www.myfloodstatus.com. Our staff of order operators and Certified Flood Plain Managers are always ready and willing to answer any question you may have.

 

What does “500-year flood” mean?

As with the “100 year flood”, the meaning of the term “500 year flood” is also often times misunderstood. Many people do not understand how it affects their structure as well as their flood insurance coverage.

The 500-year flood zone is used to designate base floodplains of lesser hazards, such as areas protected by levees from 100 year flood, or shallow flooding areas with average depths of less than one foot or drainage areas less than 1 square mile.

Common Misconceptions about the 500-year flood

The Flood Insurance Requirement – On FEMA’s Flood Insurance Rate Map (FIRM), the 500-year flood zone is designated as “B” or “X shaded” (AKA “X 0.2%”). When your structure is within this zone, flood insurance IS NOT REQUIRED by FEMA. This zone appears on the FIRM for informational purposes only!

Flood Insurance Availability – Flood insurance CAN BE purchased in the 500-year flood zone! While flood insurance is not REQUIRED by FEMA in the 500-year flood zone, it is strongly suggested. Being that there is an increased chance of flooding when you are in the “500 year(X 0.2%)” zone, it’s a good idea to purchase flood insurance to protect your investment. If one were to purchase flood insurance in this zone, it is considered a Preferred Risk Policy (PRP). PRP’s usually run the insured anywhere from 400-600 dollars per year.

The real chances of flooding – As with the 100 year flood, the most common misconception is that a 500 year flood is a flooding event that happens once every 500 years. The 500 year flood zone is a designated area that has a 1 in 500 (0.2%) chance of being met or exceeded in any given year. The 500 year flood would likely be more catastrophic than the 100 year flood which would be more catastrophic than a 20 year flood, etc.

Underestimating true risk – When your structure is within the 500-year flood zone, there is a 6% chance of being flooded over the life of a 30 year mortgage.

To obtain the most accurate and reliable flood information, get a certified insured Flood Determination from www.myfloodstatus.com. The report will show your current and proposed(if available) flood status using “visual verification” to show exactly how the flood zones affect your land and insurable structures.  Confirm, challenge, and know your true flood status with www.myfloodstatus.com today!