The National Flood Insurance Program and the Changes it Brings to New Hampshire

Jennifer Gilbert, State Coordinator for the National Flood Insurance Program, Office of Energy and Planning

The information contained in this article is not intended as legal advice and may no longer be accurate due to changes in the law. Consult NHMA's legal services or your municipal attorney.

The most common disaster in New Hampshire is flooding. New Hampshire residents have been experiencing flood events since at least 1740 when the first recorded flood occurred in the Merrimack River basin area. Flooding in the state has often been a result of heavy spring rains, spring snowmelt, runoff, ice jams, and coastal storms.

Recently, New Hampshire has experienced a flood-related disaster every year between 2005 and 2013, with the exception of 2009. Throughout this period, all areas of the state were impacted by a flood event - sometimes for a second or third time. During many of these events, residents and businesses were impacted by damage to buildings, loss of personal belongings, flooded roadways, and sometimes even loss of life. The tables on the next page illustrate the increase in both the number of flood insurance policies and the number of flood insurance losses that have been paid in New Hampshire since 2005.

New Hampshire’s almost 17,000 miles of rivers and streams and 13 miles of coastline have attracted residents and businesses since the early settlement days. Floodplain development and insuring for flood losses have been a part of New Hampshire since the first community, Lancaster, joined the National Flood Insurance Program (NFIP) in 1973. However, legislation passed by Congress in 2012 has brought the NFIP to the attention of not only New Hampshire residents, but residents across the country.

National Flood Insurance Program

In 1968, the U.S. Congress passed the National Flood Insurance Act which created the NFIP as a way to address the increase in flood damage and disaster costs across the country due to the lack of both floodplain regulations and flood loss coverage. The NFIP was set up to provide flood insurance to all residents in a community that agreed to adopt and enforce a floodplain management ordinance that met the NFIP minimum requirements. Congress also established a program to map the country’s flood-prone areas.

Floodplain Mapping

Beginning in the early 1970s, initial floodplain maps were produced that showed basic floodplain information. The maps eventually evolved into a product called the Flood Insurance Rate Map (FIRM), which show the areas within a community that are subject to the 1-percent-annual-chance flood. These areas are known as special flood hazard areas.

The FIRM is an important NFIP tool because it serves many purposes. First, it is one of the factors used by insurance companies in determining flood insurance premiums. Second, it is used by Federal and state agencies and local communities to determine whether a development is located in a special flood hazard area and, if so, to ensure that the development complies with required floodplain regulations. Third, it is also used by lending institutions to make floodplain determinations, as discussed below.

However, many of the special flood hazard areas shown on the FIRMs across the country and in New Hampshire have never been studied or haven’t been restudied since they were originally mapped in the 1970s and 1980s. State-wide watershed changes such as new development, new stormwater systems, new roadways, and stream bank erosion have all potentially changed the special flood hazard areas that are shown on the FIRMs.

In 2004, the Federal Emergency Management Agency (FEMA) took action to help remedy the need for new mapping by initiating a nationwide Flood Map Modernization Program, with the goal of upgrading the FIRMs by creating a digital product, adding an aerial photograph background, changing from community-wide maps to county-wide maps, and restudying a limited number of special flood hazard areas. In New Hampshire, between 2005 and 2013, nine of the state’s ten counties (other than Belknap) were “modernized” and issued new digital FIRMs.

Currently, FEMA’s main focus is on mapping the country’s entire coastal shorelines. New Hampshire’s coastal mapping project, which includes 17 communities in the coastal and Great Bay watersheds, is currently underway. Preliminary copies of the maps are expected in 2014 and the final maps are expected in 2015. As part of this mapping project, more detailed topographic data and the use of current engineering methods will likely change the special flood hazard areas.

At a time when the country is experiencing frequent, extreme weather events, the need for updated floodplain mapping is important in guiding development and ensuring that property owners are paying for their structure’s appropriate flood risk. However, Congress continues to cut FEMA’s mapping budget, which has limited the ability of the agency to conduct the needed studies to produce new maps. Flood mapping funds have been reduced from $220 million in fiscal year 2010 to $89 million in fiscal year 2013.

Floodplain Regulations

It is unclear when New Hampshire communities began managing development in their floodplain areas. By the end of the 1980s, 62 percent of the state’s communities had joined the NFIP and adopted the minimum floodplain regulations. Today, 214 communities (91 percent) in the state participate in the NFIP with three additional communities currently completing the enrollment process.

Many of the state’s participating communities today only enforce the minimum requirements, which include requiring the lowest floor of the structure (including a basement) to be elevated at least as high as the base flood elevation. The base flood elevation is the height the flood waters are expected to rise to during a 1-percent-annual-chance flood event.

However, it is important for municipal officials to consider regulations that go beyond the minimum NFIP requirements, as the minimum requirements are not sufficient to reduce flood damage. As noted previously, most floodplain maps don’t reflect today’s conditions. Therefore, a community floodplain ordinance should include regulations that help compensate for the limited updates to the community’s maps.

One of the most common and simplest requirements for a community to enforce is “freeboard.” Communities that enforce freeboard require that the lowest floor of the structure (including a basement) be elevated a certain number of feet (e.g. one or two) above the base flood elevation. This freeboard requirement offers the structure additional protection and can reduce a property owner’s flood insurance premium. The communities of Allenstown, Canaan, Concord, Keene, Raymond, Salem, and Winchester enforce a freeboard requirement.

In 1990, FEMA created the Community Rating System (CRS) which is a voluntary incentive program for communities participating in the NFIP. CRS communities can earn points for certain activities that go beyond the NFIP minimum requirements (such as a freeboard requirement) and the total number of points determines the percent discount that residents receive on their flood insurance premiums. Currently, four New Hampshire communities (Keene, Marlborough, Peterborough, and Winchester) participate in CRS. Interest in CRS has been recently renewed due to the new flood insurance rate changes discussed below. More information about CRS can be found at: http://crsresources.org/manual/.

Flood Insurance

After Congress established the NFIP, many incentives were offered to encourage municipal participation in the program, which would allow all residents, including those outside of the special flood hazard areas, to purchase a flood insurance policy. One incentive offered subsidized premiums to owners of structures built before the community’s initial FIRM (called Pre-FIRM structures). A subsidized premium is essentially discounted since it does not take into account the structure’s true flood risk. For example, the premium for a structure with a basement is essentially the same as a structure with its lowest floor above ground despite their different flood risks.

Despite the subsidized rates and a couple of rate decreases, community participation in the NFIP and the number of flood insurance policies purchased in these communities remained low. Fewer than 1,200 communities nationwide participated in the NFIP and only 95,000 policies were in place in 1972. Around the same time, a series of storms caused significant flooding and damage, most of which were uninsured losses. Congress took action by passing the Flood Disaster Protection Act of 1973. This legislation brought lenders into the NFIP and no longer made the purchase of flood insurance solely voluntary.

The 1973 Act mandated that federally regulated lending institutions could not “make, increase, extend, or renew any loan secured by improved real estate or a mobile home” located in a special flood hazard area of a NFIP participating community without requiring flood insurance. The Act also added a condition: communities only receive future financial assistance if they “participate in the flood insurance program and to adopt adequate floodplain ordinances with effective enforcement provisions consistent with federal standards to reduce or avoid future flood losses.”

Needless to say, the 1973 Act attracted attention and the number of communities participating in the NFIP began to rise steadily. A year after the Act passed, the number of NFIP participating communities nationwide totaled 2,850 and the number of policies totaled 312,000. In New Hampshire, only one community participated in 1973 but by the end of the 1970s community participation increased to 14 percent.

It is believed that the subsidized premiums were only supposed to be a temporary measure to entice communities to join the NFIP. In fact, the first NFIP rate increase did not occur until 1981 and further increases continued as a way to offset the subsidy. For many years, the NFIP was either self-sustaining or could borrow and repay its debt. It wasn’t until 2005 when Hurricane Katrina and other hurricanes devastated the Gulf Coast area that the NFIP experienced financial difficulties. Flood insurance claims from these storms totaled approximately $18 billion.

Biggert-Waters Flood Insurance Reform Act of 2012

On July 6, 2012, almost seven years after Hurricane Katrina and three months before destructive Hurricane Sandy, Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) in an effort to financially stabilize the NFIP. The Act called for a number of changes to the NFIP which would most significantly impact certain Pre-FIRM structures. Nationwide, approximately 20 percent of all current policies are Pre-FIRM, while in New Hampshire approximately 40 percent are Pre-FIRM due to the age of our housing stock.

BW-12 requires that certain Pre-FIRM structures be rated based on the structure’s full-risk rate, which is the same rate that is paid by owners of structures that were built after the community’s initial FIRM (called Post-FIRM structures). To determine a structure’s full-risk rate, the insurance company must have a FEMA Elevation Certificate, which is a form completed and signed by a licensed surveyor or engineer, to determine the elevation of the structure’s lowest floor (including a basement or crawlspace) and the base flood elevation. The main factor in determining the full-risk rate for a structure is the elevation difference between the structure’s lowest floor (including a basement or crawlspace) and the base flood elevation. If the elevation of the lowest floor is less than/below the base flood elevation, the cost of the policy will be higher, as is the risk of flood. If the elevation of the structure’s lowest floor is greater/higher than the base flood elevation, the risk, and thus the cost of the policy, will be lower.

The impact of BW-12 on policyholders depends upon the type of Pre-FIRM structure being insured and whether a flood insurance policy was issued prior to (existing policy) or after (new policy) the BW-12 passage date of July 6, 2012.

Existing Policies

Policyholders with an existing policy on one of the Pre-FIRM structures listed below which is located in a special flood hazard area will be charged a 25 percent annual premium increase upon renewal on or after the effective date. The annual increases will continue until the structure’s full-risk rate is reached. A FEMA Elevation Certificate will be needed to determine the structure’s full-risk rate.

  • Effective January 1, 2013 - Non-primary residences.
  • Effective October 1, 2013 – Business (non-residential) properties.
  • Effective October 1, 2013 - Severe repetitive loss (1-4 family) residences. Currently,there are only 11 such structures in New Hampshire.

The only group of policyholders who are not affected by BW-12 are those who have an existing policy on a Pre-FIRM, primary residence and have maintained continuous coverage. This group will be allowed to continue with subsidized rates. However, if the structure is sold or if the existing policy lapses, then the property owner will need to purchase a new policy.

New Policies

Starting October 1, 2013, any new policy purchased for a Pre-FIRM structure in a special flood hazard area is rated based on the structure’s full-risk rate. Therefore, before a policy can be issued or renewed, the property owner is responsible for submitting a FEMA Elevation Certificate, completed and certified by a surveyor, to their insurance company in order to determine the structure’s full-risk rate.

The immediate rate increase has had a significant impact on the real estate market across the country. In some cases, the full-risk rates have been significant enough that buyers have walked away, leaving property owners unable to sell property. However, many advocates for BW-12 feel that the increased rates are needed not only to help the NFIP to be more financially stable, but to make people aware of the structure’s full-flood risk. All parties agree there is a need to address the affordability issue as well as the need to decrease the structure’s flood risk through mitigation efforts.

Other provisions of BW-12 have not yet been implemented and will likely have an impact on additional policyholders. However, several bills currently in Congress seek to delay, eliminate, or revise many of the provisions of BW-12. The financial direction of the NFIP remains uncertain as Congress considers additional legislation that could either strengthen or weaken it.

For more information about the NH Floodplain Management Program, go to www.oep/planning/programs/fmp where you can find links about BW-12 under “Flood Insurance.”

Jennifer Gilbert, CFM, ANFI, is the State Coordinator for the National Flood Insurance Program at the New Hampshire Office of Energy and Planning.

Editor’s Note: President Obama signed the Flood Insurance Relief Bill on March 21, 2014 which:

1. Caps FEMA’s authority to raise premiums at 18% per property per year instead of the 20% permitted under the current law, and at least 5% for pre-FIRM properties until the risk is priced at full actuarial rates;

2. Repeals the requirement that flood insurance premiums for homes that are sold increase immediately to full actuarial rates; and

3. Restores the prior “grandfathering” of rates for Pre-FIRM and Post-FIRM properties based on their initial flood risk rating (resulting in premiums at the rates set for that original risk zone, rather than updated flood risk zones).

The new law also will require the certification of flood maps and require that FEMA, when evaluating an area’s flood risk for flood zone mapping, gather input from the local municipality and account for local, non-structural flood mitigation features. Among other items, it also requires FEMA to conduct affordability and alternative flood insurance studies.