What the Biggert-Waters Flood Insurance Reform Act Means for Communities

On July 6, 2012, the Biggert-Waters Flood Insurance Reform Act of 2012[1] was signed into law. In addition to reauthorizing the National Flood Insurance Program (NFIP) through September 30, 2017, the bill brings several substantive changes to the program, including several that alter the way premium rates are calculated.

These changes may mean large increases NFIP premiums. It is critical that people repairing and rebuilding structures after storms understand these changes so they can make sound and informed decisions about whether or not they want to place additional resources in harm’s way, and so they can understand the financial implications of doing so. These includes not only questions of rebuilding destroyed homes, but repairing them, too. For example, should people replace a damaged water-heater in their basement, or might they want to consider moving it upstairs? (For guidance on recovering at a community level, be sure to see the NHMA/StormSmart Build Back Safer and Stronger website.)

Following are two big changes to the NFIP everybody recovering from a storm should be aware of:

CHANGE 1: Higher Premiums for Buildings Below the Base Flood Elevation[2][3]

Congress (via this Biggert-Waters) has instructed FEMA to stop giving premium discounts to properties that are below the BFE, even if they were up to code when built. If you’d like details on how your rates might change, have a look at EDEN’s great article which includes sample calculations.

CHANGE 2: Pre-FIRM and Grandfathered Rates Phased-Out

In the past, many structures were allowed to keep their original flood-risk rating, even when conditions and improved understanding had changed. This generally occurred when:

  1. The building was built before 1975 or before the community (governing jurisdiction) received its first Flood Insurance Rate Map (FIRM). These buildings have often been insured at Pre-FIRM rates, unless the owner opts out of this option.
  2. The building was built Post-FIRM, in compliance with a FIRM, but a more recent FIRM shows the building to be at greater risk of flooding. These buildings have been grandfathered administratively, and were allowed to keep the rate-class (flood zone and building elevation relative to BFE) that applied at the time of construction.

Both subsidies largely end with the implementation of the Biggert-Waters Act, which specifies that there will no longer be subsidized rates for:

  1. Newly purchased property
  2. Property where NFIP coverage was deliberately allowed to lapse
  3. Properties receiving an offer of mitigation assistance following a major disaster, or in connection with a repetitive loss property
  4. Repetitive loss or severe repetitive loss properties
  5. Businesses
  6. Non-primary residences
  7. Substantially damaged property
  8. Property (at least) 30% improved

In short: Subsidized insurance rates will be phased out[4] for all properties except Pre-FIRM primary residences that have not lost their qualification for the rate.[5]

Recommendations for People Recovering from a Storm

If you’re rebuilding or repairing a damaged building:

  1. Find out if it is (or will soon be) below the BFE. If it is or will be, find out how your flood insurance premiums will change as a consequence of the 2012 flood insurance reform legislation.
  2. Look for updated flood risk information and build to avoid that risk – even if it is not required yet. For example, there may be new flood maps[6] in the works for your area: consider using them. Recognize that maps get revised periodically and that flood levels typically go up, not down. If you build to the current minimum standard, you could easily find yourself below the BFE when newer maps come out. Consider adding a measure of safety by incorporating freeboard (building a few feet above the minimum requirements). Don’t try to beat the system by getting a quick permit[7] to build to old standards. If you do, you’ll likely pay in the long-run, and pay big.

Final Thoughts on the Flood Insurance Reform Act

The Biggert-Waters Flood Insurance Reform Act is a complex piece of legislation, and it brings big changes. You and your community will be best off getting out ahead of it, rather than trying to adapt to it later. Decisions made now can save homeowners tens of thousands of dollars or more, but only if they have the right information to make good decisions. This page is only an introduction: there’s a bit more information in the footnotes, but if you have specific questions, you’re probably best contacting your state’s NFIP coordinator (find yours here).

This article is a joint effort by StormSmart and our friends at the Natural Hazard Mitigation Association and is published on both sites.


  1. The 2012 NFIP reform legislation passed as Title II of the Transportation Bill (H.R. 4348) and was signed into law (PL 112-141) on July 6, 2012. You can read the actual bill here, or the Association of State Floodplain Managers’ summary of the legislation here. It extended the NFIP for five years and made a number of changes related to improving the solvency of the NFIP, flood risk mapping (including mapping of levee protected areas), and flood mitigation programs. It raised the limit on annual premium increases to 20% (from 10%) and requires FEMA to submit a ten-year repayment plan for the program’s debt to the U.S. Treasury, most of which was incurred during the 2005 hurricane season.The solvency and debt-reduction requirements imposed on FEMA/NFIP by the 2012 reforms – together with the raising of the limit on annual premium increases to 20% – virtually ensures that premiums will be going up across the board. But they will go up faster on properties that are non-NFIP compliant and losing their subsidies. With the cost of being non-NFIP compliant escalating, the cost of raising the building may become more justifiable. While the legislation has passed and was signed into law with effective dates in July 2012, implementation of the provisions by FEMA will take time.  ↩

  2. The base flood is the 1%-annual-chance flood, commonly called the "hundred year flood." Base Flood Elevation is the water-surface elevation of the base flood. The depth of the base flood can be calculated by subtracting the ground elevation from the BFE. The probability is 1% that rising water will reach BFE height in any year, which compounds over a thirty-year period to 26% or more.  ↩

  3. From an insurance-rating standpoint, "below the BFE" means the elevation of the building is lower than the BFE. Building elevation in the A-zones is measured at the top of the lowest floor. Elevation in the V-zones is measured at the bottom of the lowest horizontal structural member of the foundation. Enclosures that are lower than the living space may be considered the “lowest floor” in some circumstances; machinery and equipment located below the living space may raise insurance rates. For more information, see: NFIP Elevation Certificate with foundation diagrams and FEMA Technical Bulletin 1-08: Openings in Foundation Walls and Walls of Enclosures  ↩

  4. Currently insured properties that no longer qualify for Pre-FIRM rates will see their premiums increase 25% per year until actuarial rates are achieved. When updated maps show properties in higher-risk areas (flood zones), affected property owners will see premiums increases toward actuarial rates phased in over a 5-year period, beginning on the Effective Date of the map that identifies the increased risk. For example, if the actuarial rate is $1000 per year more than the subsidized rate, the premium would increase by $200 per year for five years.  ↩

  5. A Pre-FIRM primary residence will lose its qualification for Pre-FIRM rates under the following conditions and situations: 1) When the policy-holder chooses to let the policy lapse. 2) When the property is sold. A new policy cannot be written at Pre-FIRM rates. 3) If, after July 6, 2012, the building is improved and the cost of improvement is more than 30% of the fair market value of the building before improvements were begun. 4) If, after July 6, 2012, the building is substantially damaged and the cost to restore it to its pre-damaged condition is 50% of the fair market value of the building before damage occurred. For substantial damage, the “cost” is the cost to restore the building to its pre-damage condition – even if you don’t plan to spend that much or to restore it fully. It also includes the cost of discretionary improvements you plan to make as part of the restoration project. 5) If the flood insurance claims history on the building meets one of the following criteria: Total NFIP claims paid for flood-related building damage exceed the fair market value of the building. The property is a severe repetitive loss (SRL) property – A single family property with 1-4 residences is an SRL property if it has incurred flood-related damage resulting in four or more claims payments for building damage that exceed $5,000 each, OR, two claims payments for building damage that together exceed the value of the insured building. 6) If the owner of a repetitive loss property refuses an offer of mitigation assistance (to raise or relocate the building), including an offer under the Hazard Mitigation Grant Program (HMGP)  ↩

  6. How old are your community’s maps? Check out the NFIP Community Status Book to find out.  ↩

  7. Remember, ALL building, rebuilding, and restoration work in the flood zone requires a permit from the local permit office. If the building is below the BFE and the estimated damage is substantially damaged, the permit will be denied unless the repairs bring the building into NFIP compliance. "Substantially damaged" means the cost to restore the building to its pre-damaged condition is 50% or more of the fair market value of the building before this damage occurred. If your community fails to require substantially damaged structures to be made compliant it can be expelled from the National Flood Insurance Program (if this happens, flood insurance will not be available for anybody in the community). See the Substantial Improvement/Substantial Damage Desk Reference for more details.  ↩

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