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Elimination of subsidized flood insurance premiums through annual rate increases

The Biggert-Waters Flood Insurance Reformation Act of 2012 (BW 12) reauthorized the National Flood Insurance Program (NFIP) through September 30, 2017.  Along with other changes described in previous agency bulletins, BW 12 included a mandate to eliminate the offering of NFIP coverage at 'subsidized' premiums, which refers to premiums set artificially below the level suggested by the actuarial experience of the class of business.  Elimination of subsidized premiums will occur in one of two ways.  For some, it will occur through a series 25% annual rate increases.  This bulletin will address the specifics of which policies will see the 25% increases and how Auto-Owners will help you manage them.


Policies affected by the elimination of subsidized premiums through ongoing annual rate increases are those rated with pre-FIRM flood zone  A*, V* or D rates and covering;

1.Non-primary/principal residences (implemented on January 1, 2013);

2.Commercial buildings;

3.Buildings subject to the NFIP's Severe Repetitive Loss rule; and

4.Buildings experiencing cumulative flood damages exceeding their fair market value.

 Pre-FIRM buildings are those built prior to January 1, 1975 or before the community where they are located adopted its first Flood Insurance Rate Map (FIRM).  Buildings constructed prior to these dates, and not substantially improved or repaired after them, are labeled pre-FIRM. 

* The flood zones affected include all zones beginning with an A or V, except A99 and AR.


There is currently no planned end date for the 25% annual rate increases scheduled for the targeted policies.  The annual increases will continue at each subsequent renewal of the policy until the policy is converted to post-FIRM rating.  For most affected flood zone A and V buildings, conversion to post-FIRM rating requires the submission of an Elevation Certificate and photographs of the front and back of the building.  An exception to that are unnumbered V zone buildings when no Base Flood Elevation has been developed by the community.  For those buildings, and all zone D buildings, a recent photograph is required at the time the building is converted to post FIRM rating.

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