On March 21, 2014, President Obama signed into law the “Homeowner Flood Insurance Affordability” amendments to the 2012 Biggert-Waters law:
- Repeals the property sales trigger requiring that buyers immediately pay the full-risk premium rate at the time of purchase.
- Restores “grandfathering” of rates under flood zones when properties were built to code.
- Limits future increases to 18% annually for most properties built generally after 1975 and 25% for the older properties until they are paying full cost for flood insurance.
- Refunds any premiums paid by property owners in excess of 18-25% increases.
This represents a dramatic departure from earlier versions that would have “paused” increases until FEMA reported on affordability. As enacted, the bill hits the “reset” button back to pre-2012 levels and caps all increases going forward. To make up revenue, a small assessment is added to all NFIP policies until property owners are paying full cost for flood insurance.
While going further in making permanent changes to law and providing refunds, the bill also allows 8-16 months for FEMA to issue the regulations to implement these changes. Most property owners will not see these changes reflected in rate quotes and insurance renewal notices right away.
[Note: This summary is for informational purposes only. It is not intended to be legal advice or relied upon in connection with a real estate transaction without consulting legal counsel.]Tweet