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Second Story – Spring/Summer 2013
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Climate Change and Extreme Weather
VOLUME 27, NUMBER 3, SPRING/SUMMER 2013             

Climate Change and Extreme Weather
By John H. Tibbetts                                                                       back to main story  

New flood maps and premium changes coming

Many owners of older, low-elevation structures in South Carolina could face sticker shock when they see their flood-insurance bills over the next several years.

After numerous major hurricanes and other disasters over the past decade, the federal flood-insurance program was swimming in red ink. 
On July 6, 2012, a new law passed by Congress made significant reforms to the program, including eventual elimination of all subsidies.

The National Flood Insurance Program (NFIP) will roll out new preliminary flood-risk maps in communities around the country over the next year. These maps will provide information to be used by NFIP to update insurance policies.

New homes and other structures in flood-risk areas already must be elevated on pilings or by other means to meet NFIP requirements. Elevating the first habitable floor of a structure is a cost-effective way to avoid destructive floods.

But thousands of structures built decades ago were grandfathered into the program and given low-cost insurance premiums without an elevation requirement.

“We saw this problem during Hurricane Sandy,” says Thomas J. McGuire, the floodplain management coordinator for Charleston County. “There were a lot of homes in older, developed areas on Staten Island and other places that predated [the federal flood insurance rules], and they weren’t elevated. They didn’t have proper foundation systems, and many property owners thought they were not susceptible to coastal flooding.”

Subsidies are being phased out for second homes, rental houses, and commercial properties that were not raised on pilings or new foundations and were built before the federal flood-insurance program came into effect in 1968. Subsidies for severe repetitive-loss properties will be phased out later in 2013.

By late 2014, all subsidies are supposed to go away, but they would not go into effect right away for some homeowners, according to Maria Lamm, the NFIP coordinator for South Carolina.

Many properties covered by existing subsidies would continue to be charged lower rates until they are sold or if policies are allowed to lapse. (Check with your insurance agent. The Federal Emergency Management Agency runs the program, but private insurers administer policies.)

Premiums for low-elevation structures in vulnerable locations would get signficantly more expensive. Think of an older home built on a slab not far from the beachfront with coverage of $250,000 on the structure and $100,000 on the contents. Let’s say that the first inhabited floor is three feet under the designated “base-flood elevation” in a high-risk VE zone.

The owner of this building would eventually face an annual premium of $18,354, according to Spencer Rogers, a coastal construction and erosion specialist with the North Carolina Sea Grant program. That would be an increase of 142% over the previous premium of $7,454.

Rate increases, however, would be limited to 25% annually until the accurate flood-risk premium is reached.

The 2012 law will change premiums on many structures far inland.

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Last updated: 8/19/2013 2:52:11 PM
Second Story – Spring/Summer 2013


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