Willo Kelly's presentation from 1/9/14 in Kill Devil Hills on the NC Rate Bureau's proposed rate revisions for 2014, just months after new homeowners insurance rates increased in July 2013. Just six months after the insurance rate hikes, the Rate Bureau is seeking another 25 percent statewide (North Carolina) and more than 35 percent along the Outer Banks and the North Carolin coast. These are the facts that the Department of Insurance will consider when they examine the Rate Bureau's proposal to see if the rate increases are warranted. As you will see, charging significantly higher rates in coastal NC counties represents an unfair burden. The cost of homeowners insurance affects housing affordability, financing, re-financing and economic development. There has not been a hearing on a Homeowners Insurance Rate Filing since 1993. The NC Department of Insurance is accepting written public comments on the HO Rate Filing through January 31st by email at 2014homeowners@ncdoi.gov. A public comment session will be held on Friday, January 24th from 9:30am to 4pm in the Jim Long Hearing Room of the Dobbs Building, 430 N. Salisbury St. in Raleigh. The US Senate is expected to vote soon on the Homeowner Flood Insurance Affordability Act, S. 1846 that was introduced by NJ Senator Menendez in December. S. 1846 would delay certain premium increases put forth in the Biggert-Waters Act for four years until FEMA can complete its Affordability Study and Congress can consider the recommendations of the study. This is common sense legislation; Congress and FEMA should understand the ramifications of the Biggert-Waters Act before implementing it. If this legislation is not implemented, homeowners and business owners across America will see dramatic, unaffordable flood insurance premium increases when they lose "grandfathering" under new maps. PLEASE CALL SENATOR RICHARD BURR AND SENATOR KAY HAGAN AND URGE THEM TO VOTE YES on the motion to proceed to S. 1846, and YES on the bill and final passage. Senator Hagan has been supportive of the delay; Senator Burr has maintained his support for the Biggert-Waters Flood Insurance Reform Act of 2012 and has not been receptive to making changes to the law. Contact info: Senator Richard Burr: (202) 224-3154 http://www.burr.senate.gov/public/index.cfm?FuseAction=Contact.ContactForm Senator Kay Hagan: (202) 224-6342 http://www.hagan.senate.gov/contact/

1. January 9, 2014
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2. North Carolina 2014 Homeowners Filed Rate
Revision by Territory
Per $75,000 Amount of Insurance
Protection Class 1 -5
Territory
7
8
48
49
Territory Definition
Currituck, Dare & Hyde
Brunswick, Carteret, New Hanover,
Onslow & Pender
Currituck, Dare, Hyde & Pamlico
Beaufort, Camden, Chowan, Craven,
Jones, Pasquotank, Perquimans,
Tyrrell & Washington
CURRENT RATE
% FILED
RATE FILED
$ DIFFERENCE
$1,613
35.0
$2,178
$565
$1,823
35.0
$2,461
$638
$1,021
9.8
$1,121
$100
$871
7.8
$939
$68
52A
Brunswick, Carteret, New Hanover,
Onslow & Pender
$1,140
35.0
$1,539
$399
52B
Brunswick, Carteret, New Hanover,
Onslow & Pender
$1,140
-2.7
$1,109
$-31
www.nc-20.com
2

3. North Carolina Rate Bureau 2014 Homeowners Insurance
Rate Filing
Impact on NCIUA (Beach Plan Policies)
Full Homeowners and HO Wind Only Policies
Territory Territory Definition
Currituck, Dare &
7
Hyde
Brunswick, Carteret,
8
New Hanover, Onslow
& Pender
48
49
52A
52B
Currituck, Dare, Hyde
& Pamlico
Beaufort, Camden,
Chowan, Craven,
Jones, Pasquotank,
Perquimans, Tyrrell &
Washington
Brunswick, Carteret,
New Hanover, Onslow
& Pender
Brunswick, Carteret,
New Hanover, Onslow
& Pender
Full Peril
Full Peril
(Wind
Rate with
Included)
1.15
HO
Homeowners NCIUA Fire/Liability
Policy
Surcharge Portion of
Filed Rate
Factor
Filed Rate
Wind Rate
with 1.05
NCIUA
Wind Only Surcharge
Filed Rate
Factor
$2,178
$2,504.70
$293
$1,885
$1,979.25
$2,461
$2,830.15
$287
$2,174
$2,282.70
$1,121
$1,289.15
$120
$1,001
$1,051.05
$939
$1,079.85
$280
$659
$691.95
$1,539
$1,769.85
$267
$1,272
$1,335.60
$1,109
$1,275.35
$293
$816
$856.80
Rates are based on $75,000 dwelling value coverage, HO-3 policy, frame construction.
www.nc-20.com
3

4. KEY
Total Reports = 1687
RED—Tornadoes = 113
GREEN—Hail Reports = 347
BLUE—Wind Reports = 1226
www.nc-20.com
4

5. Rates for $75,000 of HO Coverage:
1993 2014(filed)
Charlotte
$ 351
436
Gaston, Mecklenburg, Union
350
436
Ashe, Buncombe, Burke
312
431
Alamance, Guilford, Davidson
350
477
Currituck, Dare, Hyde (obx)
578 2,178
Currituck, Dare, Hyde mainland
417 1,121
www.nc-20.com
5

6. Flood Insurance
The Impact of the Biggert-Waters
Flood Insurance Reform Act of 2012
July 27, 2012
www.nc-20.com
6

7. DHS – Department of Homeland Security
FEMA – Federal Emergency Management Agency
NFIP – National Flood Insurance Program
www.fema.gov; www.floodsmart.gov; www.ncfloodmaps.com
FIRM – Flood Insurance Rate Maps
www.Region2Coastal.com
Pre-FIRM – prior to effective date of Flood Maps
SFHA – Special Flood Hazard Area
CRS - Community Rating System
BW-12 –Biggert-Waters Act of 2012
WYO – Write Your Own Companies, 90 in US that write
flood insurance through NFIP.
*NMG – No More Grandfathering
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8. BFE – Base Flood Elevation
V-Zones: Coastal high-velocity zones
A-Zones: Non-velocity zones, which are
primarily riverine zones
X-Zones: Zones outside the Special Flood
Hazard Area.
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9. 
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
“the most costly and prevalent natural disaster risk
in the United States…”
1968 – Post extreme flooding events, Congress
authorized the NFIP to reduce property losses from
flood peril and public spending to compensate
disaster victims. Private insurance companies were
not willing to write coverage for flood risk.
National Flood Insurance Act of 1968 mandates
that coverage be widely available and affordable.
FEMA administers NFIP and sets rates based on
100-year floodplain of potential flood hazards.
52% of US population lives within 50 miles of a
watershed area. (NOAA)
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10. 
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Flood insurance required on federally backed
mortgages.
22,000 communities in ALL states and territories
participate in the NFIP
5.6 million policies
$1.2 trillion in exposure (structure and contents).
2012 premiums: $3.5 billion
NFIP not required to have statutory reserves.
From 1978 thru 2012, the NFIP has collected $6
Billion more in premium than claims paid.
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11. WYO Program created in 1983. Allows companies to
write and service the NFIP in their name without bearing
the risk.
 Ninety private WYO companies write policies, and
process, settle, pay and defend all claims.
 More than 1/3 of NFIP premiums collected goes to WYO
companies and agents.
 NFIP pays WYOs 15.6% of premiums as Expense
Allowance (advertising, policy writing, general
expenses, etc.); a 15% Commission Allowance; an add’l
2% if WYO meets 5% net growth in policies; Post-flood
event – NFIP pays claims adjustment expenses PLUS
3.3% of each claim settlement for processing expenses.
(This was adjusted after Katrina to prevent windfall to
companies)
FEMA does not know how much paid to WYO companies
covers expenses vs. how much is profit.

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12. 


Financially sound for over three decades.
Successful in enacting local floodplain
ordinances & compensating property owners
for flood loss.
2005 – Hurricanes Katrina, Rita and Wilma $$$
◦ Forced NFIP to borrow $21 Billion from US Treasury
Program’s insolvency blamed on four major flaws:
 Does not charge full risk-based premiums for all
properties
 Repetitive loss properties
 Mapping – outdated
 Residual risk properties – exempts properties
behind flood-control structures (levees and dams).
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13. 13

14. The Good News:
Reauthorizes the NFIP for 5 years!
The Not-So-Good News:
Four Major Reforms
 Amendments to coverage, rate and premium
structures.
 Requirement for repayment plan and reserve
fund.
 Updates to Mapping Program.
 Amendments to eligible mitigation activities.
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15. 




Rates are based on BFE and flood zone.
BW-12 will make the NFIP more financially stable
by raising rates to reflect true actuarial flood risk.
FEMA reports 78% of policyholders already pay
actuarial premiums. True risk is debated. (CRS)
“Charging rates that fully reflect flood risk
arguably would discourage development in the
most risky areas.”
Consideration will now be given to historical loss
data including catastrophic years and other factors
such as coastal storm surge and climate change.
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16. Subsidized (discounted rates) removed from
pre-FIRM non-primary residences.
Rates will increase 25% a year until
actuarial rates achieved.
If your non-primary residence (lived in less than
80% of the year) was built prior to approximately
1974 and has had no major repairs or renovations,
then the policy premium is most-likely discounted.
Only 20% of policyholders (approx. 1.1 million) pay
subsidized rates AND only 5% are second home
policyholders.
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17. 
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Average 10% overall rate increase.
◦ V-zones: post-FIRM 11%; pre-FIRM 17%
◦ AE-zones: post-FIRM 6%; pre-FIRM 16%
◦ X-Zones: Standard rated policies 8%; Preferred
risk policy (PRP) written under the PRP Eligibility
Extension 19%; all other PRP, no change
Reserve fund (mandates $12 billion) - assessment
of 5% for all policies – will be included in overall
rate increases.
New Application Forms and Elevation Certificate
requirements.
No extension of subsidy discount to new or lapsed
policies for pre-FIRM properties in SFHAs.
◦ Does not apply to rollovers, transfers, or rewrites.
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18. Rates to increase 25% a year for other subsidized
discounted:
 Commercial properties.
 Severe repetitive loss properties (more than 4 claims).
 Properties that have incurred flood-related
damages where claims payments exceed fair
market value.
Full risk rates will also apply to policies written for
newly purchased property.
◦ Effective for renewals post 10/1/2013 of subsidized
discounted properties if purchased after July 6, 2012.
◦ Does not apply to gifts, transfers of ownership, or
assignments to estate or trust in which purchase did not
take place. (LLCs)
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19. Severe Repetitive Loss Properties (RLPs)
 Disproportionate large share of all claims.
 Approximately 1% of all NFIP properties
historically account for over a third of claims
paid.
 90% of RLPs Pre-FIRM
 NC RLPs – through 2011
◦
◦
◦
◦
$474.5 million in claims paid
24,136 claims on 8,664 properties
Average payment per claim $19,658.17
Total average payment per property $54,709
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20. 
Premium rates for other properties, including
non-subsidized discounted properties, will
increase as new or revised flood insurance rate
maps become effective. Full risk rates will be
phased in for these properties. You will no longer
be allowed to continue to pay to the zone and
elevation in place at time of construction. Your
primary residence could be affected!
NO More Grandfathering!
“Even if you build to minimum standards today, you
will be subject to significant rate increases upon
remapping if your flood risk changes in the future.”
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21. 
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
Increases the limit for annual rate increases
from 10% to 20% per year.
Allows for premium payments – either annually
or in more frequent installments.
Lenders will be required to escrow payments
and will be in control of claim payments to
ensure repairs are made.
Increased deductibles: pre-FIRM up to
$100,000 of coverage - $1,500, pre-FIRM over
$100,000 - $2000
Post-Firm deductible: up to $100,000 $1,000, over $100,000 - $1,250
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22. 

Revised flood maps are due from NFIP in
2014. NC Floodplain Mapping Program
estimates Dare’s preliminary maps will be
released July 2014.
There will be a new mapped zone – the
“Coastal A Zone”.
◦ Behind the V zone and other areas that experience
a limit of wave action 3 ft. to 1 ½ ft.
◦ Could affect all soundfront property owners.
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23. 
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Establishes a Technical Mapping Advisory Council
that would advise FEMA on improving accuracy;
on standards that should be adopted for flood
maps, data and map maintenance; and on
funding needs and strategy which could include
the purchase of reinsurance.
TMAC to develop recommendations for future
conditions, including impacts of sea level rise, to
determine rates.
“The reforms will help communities looking to
adapt to climate change. “
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24. 
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Be proactive and contact your insurance agent.
Ask how the changes are going to affect your
policy. Check your dwelling value!
Get a new elevation certificate to determine base
flood elevation. This determines your rate.
Higher deductibles might lower your premium
“Consider Remodeling or Rebuilding” – build
higher, add vents to foundation or use breakaway walls.
Community-wide mitigation steps?
Provide input and feedback!
ncinsurancehelp@gmail.com
24

25. 
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Second Home Debate – MOOT POINT!
◦ Second Home Pre-FIRM policies only make up about 5% of
total NFIP policyholders.
◦ Second Home policyholders do not have Replacement Cost
Coverage – they only have ACV coverage.
◦ Taxpayers are NOT Subsidizing Flood Insurance for BIG Second
Homes/Vacation Homes.
The definition of NFIP SUBSIDY.
The amount of additional premium revenue BW-12
would generate.
The amount of interest NFIP policyholders have paid on
the debt from Hurricane Katrina.
The detrimental impact of BW-12 on middle class
mortgage holders.
◦ Unable to pay exorbitant premium, unable to sell, foreclosure
◦ Lower market value, decreased local tax revenues
25

26. Regardless of the size of the structure, the NFIP residential
structure policy limit is $250,000.
26

27. Pre-FIRM oceanfront Motel in Kill
Devil Hills. Owner will start seeing
a 25% increase in rate a year until
the actuarial risk rate is achieved.
Owner currently pays $5,600 a
year for flood insurance. To find
out what his ultimate premium
would be once phased in, he
asked his agent what a new
owner would have to pay if he
sold the property. The owner
was told the premium would be
approximately $55,000.
www.nc-20.com
27

28. The Senate will likely vote next week on
S. 1846 - Flood Insurance Affordability Act
This bill would delay the loss of grandfathering and
other burdensome provisions of BW-12 for 4 years.
Call NC Senators and tell them to support
this bill!
SENATOR RICHARD BURR (202) 224-3154
SENATOR KAY HAGAN (202) 224-6342
28

29. Willo Kelly
President, NC 20
www.nc-20.com
Government Affairs
Outer Banks Home Builders Association
Outer Banks Association of Realtors
ncinsurancehelp@gmail.com
(252) 202-7927
29