Understanding the Ever Changing Landscape of the National Flood Insurance Program (NFIP)

Houses under water

If you even have the potential of working with properties that fall within a flood zone, you need to stay informed on the National Flood Insurance Program (NFIP).

To fully understand the changes that have taken place and are expected to take place for the NFIP, you first need to look at its history. Bare with us—this is important:

The NFIP was created in 1968 to allow homeowners in participating communities to purchase flood insurance from the federal government. The majority of these participants, 5.5 million by 2010, were located along the coasts of Texas and Florida.

By 2012, both Hurricane Katrina and Superstorm Sandy had devastated large swaths of coastal regions in the United States. The fallout from this was unprecedented rate hikes in insurance policies, some as high as 25 percent.

This in turn led Congress to pass the Biggert-Waters Flood Insurance Reform act in 2012, which extended the NFIP for five years, while at the same time imposing significant reform to the program itself. The reasoning behind Biggert-Waters was that the higher premiums (the highest going to secondary properties located in frequently flooded areas) would help to pay down the $24 billion of debt that the NFIP accumulated after Superstorm Sandy and Hurricane Katrina.

On March 21, 2014, President Obama signed the Homeowner Flood Insurance Affordability Act (HFIAA) into law, in an effort to roll back price hikes created under Biggert-Waters after homeowners, lawmakers, and real estate professionals complained.

All of us this leads us (finally) to the new NFIP, which was changed by FEMA in 2014. When the new NFIP was rolled out in 2014, it stated that its key priorities were to work with homeowners and real estate professionals to issue refunds, stop rate increases and surcharges, provide accurate mapping, promote mitigation, and work as a flood insurance advocate. (The entire FEMA document can be accessed here.)

The amount of information that pertains to the NFIP is huge and ever changing, but we’ve summarized key areas of recent change for you below. In April of 2015, a summary of changes to the NFIP were released (in-depth information on the April 2015 changes can be found here). The changes therein pertained to:

  • Premium Increases and Surcharges
  • Minimum Retentions
  • Property Newly Mapped into the SFHA
  • Increased Optional Retentions
  • Substantially Damaged/Substantially Improved Structures
  • Additional Rating Guidance for Pre-FIRM Buildings
  • Clarifications Regarding Property Addresses

An additional set of changes to the NFIP were released in November of 2015. These included:

  • Identification of Business Occupancies for Policies Currently Covering Non-Residential Buildings in order to Implement 25% Increases for Pre-FIRM Subsidized Business Properties
  • Incorporation into the Flood Insurance Manual of Certain Rates for Buildings with the Lowest Floor Below the Base Flood Elevation
  • Changes to the Flood Insurance Underwriting Forms
  • Flood-proofing Certificate for Non-Residential and Business Structures
  • Changes to the Endorsement and Cancellation Refund Rules
  • TRRP Reporting Requirement for Mortgage Portfolio Protection Program (MPPP) Policies

The NFIP will be required to be reauthorized in 2017, with further changes expected between now and then. Some states are already ramping up efforts to organize lawmakers and real estate professionals to lobby Congress for additional reform (check with your local Realtors Association for more information).

In the meantime, flood map changes happen on a somewhat regular basis. To keep apprised of those changes, refer to flood map update schedule through foodsmart.gov if you suspect you are working with a property in a flood zone.


As the market leader of Errors & Omissions insurance for the real estate industry, CRES Insurance has protected over 500,000 real estate professionals nationwide. We are known for our “best value” pricing, comprehensive coverage and outstanding customer service. Learn about how we can protect you and your business here.

This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.

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