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Council Adopts Resolution Seeking Flood Insurance Changes

Managing Editor

CAROLINA BEACH - The Carolina Beach Town Council unanimously adopted a resolution supporting an amendment to the federal Biggert-Waters Flood Insurance Reform Act of 2012 at their Tuesday August 13, meeting.
Ryan McAlister of Business Alliance for a Sound Economy (BASE) requested the Council consider adopting the resolution.
According to the resolution, Congress passed the National Flood Insurance Act of 1968 specifically to ensure flood insurance coverage is available on reasonable terms and conditions to citizens who have a need for such protections. The National Flood Insurance Program (NFIP) plays a critical role in the location, placement, and construction of homes and structures within a community; and provides for an estimated 5.68 million NFIP policies nationwide.
Under the NFIP, participating communities with structures located and built in the Special Flood Hazard Areas (Flood Zones A and V); and are backed by federal lender institutions are required to purchase mandatory flood insurance policies.
On July 6, 2012 the President signed into law the Surface Transportation Bill (HR. 4348), which included the Biggert-Waters Flood Insurance Reform Act (BW-12).
The "Act" (BW- 12) re-authorizes the National Flood Insurance Program (NFIP) through 2017, but also puts into place many significant reforms as a result of the high losses incurred by the program in 2005 from Hurricane Katrina and in 2012 from Super Storm Sandy for the program to be financially solvent.
According to the resolution, these reforms include dramatic and in many cases immediate changes for structures built pre-firm (Section 205 of the Act), and structures that were built postfirm (Section 207 of the "Act") as well as lowering the threshold for what is deemed to be a substantial improvement.
Pre-Firm means structures built prior to the establishment of the NFIP and flood maps.
The "Act" will implement actuary insurance rates for homeowners, business owners, and prospective buyers upon the sale or purchase of real property or a lapse in insurance coverage after July 1, 2012.
Section 205 of the "Act" removes historical subsidized insurance rates for all nonprimary residences and business properties that have been lawfully constructed prior to the first Flood Insurance Rate Maps (pre-firm) and are now subject to receive "Full Risk Rates" at a rate of 25% a year until the "Full Risk Rate" is achieved.
Section 207 of the "Act" removes historical subsidies for any structure (grandfathered or non-subsidized) that is affected by a FIRM designation to a Special Flood Hazard Area and will be subject to receive "Full Risk Rates" at a rate of 20% per year until the "Full Risk Rate" is achieved.
The "Act" redefines the term "substantial improvement" discouraging the remodeling, and renovation of existing structures by lowering the threshold for "substantial improvement" from 50% of the value of the structure to 30%.
Nationwide NOAA data shows that 52% of the U.S. population lives in a coastal water shed county; and over 50% of the U.S. population lives near a river, creek, bay, sound, lake, stream, or ocean.
The resolution states, "The Town of Carolina Beach is extremely concerned that the "Act" will financially impact home and business owners; devalue properties; discourage construction; hinder real estate sale transactions; and may result in foreclosures to owners who have lawfully constructed their homes and businesses as allowed by the NFIP within flood plains and state's building code."
The resolution states the Town Council of the Town of Carolina Beach urges Congress to amend the Biggert-Waters Reform Act to:
• Provide for a slower rate of increase to flood insurance rates over a greater time period to meet Full Risk Rates.
• Extend the Grandfathering provisions for all existing policies who have lawfully constructed their homes per the State Building Code and upon transfer.
• Reinstate the substantial improvement threshold at the historical limit of 50% of the value of the structure.
• Address the cost savings that could be incurred through rate making processes by participating NFIP communities that engage in Federal Storm Damage Reduction projects, or have specific State building codes, or enhanced construction standards that would further limit flood loss and decreases the amount of damage community wide.
The resolution states the Town Council urges Congress to direct an independent examination to review the National Flood Insurance Program's (NFIP) proposed actuarial rates; NFIP solvency; and assess the burden that the Biggert-Waters Act of 2012 will impose on policy holders.
McAlister explained there does not seem to be any consolidated effort to challenge the impacts of the Biggert Waters Act either locally, at the State level or Federally. The Act was passed within a Transportation Bill with limited discussion or opportunity for public input. Any discussion and debate came long after the Act was approved.
He explained, "No one really knows the specific financial impact to individual property owners or collectively as a Town which are likely significant.
He explained that in a couple of cases property owners are faced with paying upwards of $30,000 in a year in Flood Insurance making it hard for them to even sell their properties. And those are not million dollar homes.
Councilman Steve Shuttleworth pointed out that figure concerns some homes in the $200,000 price range.
McAlister explained Municipal budgets will be impacted by the cost of higher flood insurance premiums. Flood zones are generated using lidar mapping and modeling. There may be a number of zones that are overstated and, in turn, would cause huge increases in insurance premiums.
He explained, "The Act treats similar properties differently. As an example, there may be 2 exact homes built at the same time adjacent to each other with the same value and risk. The primary residence would be impacted less and at a slower rate. The secondary home would be impacted immediately and at a higher rate.
Also, homeowners will have to pay for flood elevation certificates for insurance and each time there is a change in status.
The impact of high insurance premiums will affect home prices, home sales and rents. Ultimately, homeowners may choose to walk away from their properties. The high cost of insurance may result in foreclosures or owners may discontinue coverage even though it may be needed.
McAlister explained that with property owners choosing to not cover their residences or losing their properties and not paying premiums, the financial well-being of the National Flood Insurance Program could be jeopardized.
The Town will have new flood maps within a year. The change in those maps would again require a new flood certification and create additional confusion.
The impact of the higher premiums will have a significant impact on those along the coast that are just getting back or trying to get back to normalcy following a hurricane event.
The Reform Act leaves the subsidized rates in place for primary residences except for houses: 1) newly purchased; 2) not previously insured; 3) with temporary policy lapses; or 4) substantially damaged or with improvements more than a cumulative 30% of the fair market value. The Act deletes all subsidies for second homes, rental houses, businesses and severe repetitive loss properties. The present subsidized rates will be increased 25% each year until the actuarial rates are reached."
Homes located in a high-risk flood zone (i.e., zones beginning with an “A” or “V”) and built before the first flood insurance rate map became effective, and that have not been substantially damaged or improved, may currently be receiving subsidized flood insurance premium rates.
Flood risk is unique to each structure and depends upon factors such as the elevation of the property relative to predicted flood levels, the construction style of the building, and the flood risk zone. FEMA publishes flood hazard maps that show predicted flood levels and flood risk zones based on historical climate information and the best available science. Some common examples of Special Flood Hazard Areas include coastal floodplains, floodplains along major rivers, and areas subject to flooding from ponding in low lying areas.
Many properties in Carolina Beach are located in flood plain areas.
For example, areas along the oceanfront are typically located in VE zones while those located farther inland are located in AE zones.
For example, the Carolina Beach Town Hall is not located in a flood zone while Carolina Beach Elementary School is located in an AE zone.
To view a map of these zones, visit the Town of Carolina Beach website at www. under the Planning Department section. Or, visit
According to Spencer Rogers of the North Carolina Sea Grant, as an example of the premium increases, coverage for a $100,000 building and $40,000 contents now has an approximate annual pre-FIRM premium in the AE-zone of $1,256. If the older building can meet the present floor-elevation requirement, the rate increases 16%. In the case that the building is at least 1 foot below base flood elevation (BFE), the present rate triples or more. In the VE-zone, the present $2,221 premium will increase to $7,566 (241% increase) or more if the building is 3 feet or more below BFE on the latest maps.
NFIP rules and policy have historically required that the Flood Insurance Rate Maps and the insurance rates were based on present rather than future conditions. The Reform Act establishes a Technical Mapping Advisory Council, which was given one year to develop recommendations for future condition mapping, including sea-level rise and future development. The latter refers to stormwater runoff increases due to future development, which can be an issue in riverine flood modeling. Both could potentially result in significant increases in the base flood elevations. The Council could choose to add either to future flood mapping methods or maintain the present policy preventing any impact on insurance premiums."