Premium and Reserve Fund Increase April 1, 2015

National Flood Insurance Program (NFIP) flood insurance rates and other charges will be revised or added for new or existing policies beginning April 1, 2015, as a result of recent flood insurance legislation known as the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA).Some of the changes taking place in April include rate increases for most policies and an increase in the Reserve Fund assessment. Please see below for details on these changes.Rate Changes. The NFIP will be implementing annual rate changes using rate-increase limitations set by HFIAA for individual premiums and rate classes:
  • Limits increase for individual premiums to 18 percent of premium.
  • Limits increase for average rates to 15 percent of premium.
  • Mandatory increases of 25 percent for certain subsidized policyholders under previous flood insurance legislation known as the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert Waters), as well as HFIAA.
Reserve Fund Increase. In addition, Biggert-Waters required the establishment of a Reserve Fund to help cover costs when claims exceed the annual premium collected by the NFIP. The Federal Emergency Management Agency (FEMA) began collecting an assessment in 2013 to add money to the Reserve Fund. The Reserve Fund assessment initially applied to all policies other than Preferred Risk Policies (PRP) in 2013. The assessment on those policies will increase in 2015. Starting in 2015, PRPs also will begin contributing to the Reserve Fund.
The increase in Reserve Assessment is built into the overall rate increases, which are capped as explained earlier. The HFIAA surcharge, which will be featured in the next news alert, is separate from rate increases and does not affect the rate cap.Please be on the lookout for our next news alert about the HFIAA surcharge, and share this alert with your colleagues. Be sure to visit FEMA’s Flood Insurance Reform webpages and read the related WYO Bulletins. You can also access the previous alert in this series here.