FEMA Flood Insurance: Refund Procedures

FEMA issued a bulletin which addresses refund procedures for policies affected by the Biggert-Waters Flood Insurance Act of 2012, (BW12) and the Homeowners Flood Insurance Affordability Act of 2014.  

You can access the Bulletin by clicking here: http://www.nfipiservice.com/Stakeholder/FEMA3/W-14035.html

Here's a breakdown of what you'll find:

Section 3- Beginning October 1, 2014, refunds will be issued for the following types of Pre-FIRM policies:

• New policies effective on or after October 1, 2013, covering Pre-FIRM buildings newly insured on or after the enactment of BW12 (July 6, 2012), that were charged full-risk rates, tentative rates or provisional rates on or after October 1, 2013.
• Renewal policies covering Pre-FIRM buildings that were newly insured with Pre-FIRM subsidized rates on or after July 6, 2012 and before October 1, 2013, and that renewed on or after October 1, 2013, with full-risk rates, tentative rates or provisional rates.
• Policies covering Pre-FIRM buildings where the building was insured with Pre-FIRM subsidized rates prior to July 6, 2012, and the building was newly purchased on or after July 6, 2012, and where the policy was endorsed upon assignment, and was charged full-risk rates, tentative rates, or provisional rates effective on or after October 1, 2013.
• Policies covering Pre-FIRM buildings with Pre-FIRM subsidized rates prior to July 6, 2012, where the policy lapsed and was reinstated with a reinstatement effective date on or after October 4, 2012, and was subsequently charged full-risk rates, tentative rates, or provisional rates on or after October 1, 2013.
• Policies renewing with Pre-FIRM subsidized rates effective on or after October 1, 2013, covering Pre-FIRM primary residence buildings originally insured before July 6, 2012, where continuous coverage with Pre-FIRM subsidized rates has been maintained.

Section 5-  FEMA is prohibited from increasing rates more than 15% per year within a single rate class, or more than 18% for any individual policyholder.  Refunds will be issued for all policies, including PRPEEs that exceeded the premium increase caps.  Eligibility will be based on policies with an effective date of March 21, 2014 or later.  This applies for New Business and Renewals on both Pre-FIRM and Post-FIRM buildings.   

However, there are exceptions that are not eligible for a refund:

• Pre-FIRM properties receiving subsidized rates subject to the BW12’s mandatory 25% rate increases for; Non-primary Residences, Businesses, Severe Repetitive Loss (SRL) properties, including Cumulative Loss Properties and substantially damaged or improved properties.
• Properties located in a community that loses its Community Rating System (CRS) standing.
• Increases in premium due to a decrease in the deductible or an increase in coverage.
• Misrated properties.

Premium refunds will be completed by either a policy change endorsement or by cancelling and re-writing a policy.  The WYO insurers cannot begin issuing HFIAA refunds until October 1, 2014 and are required to complete issuing all refunds by December 31, 2014.  They will be issuing the refunds as fast as possible. Refunds will be mailed to the named insured on the policy regardless of the payer. 

Contact Principle Insurance with your questions!

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