The Biggert Waters Act of 2012 (BW-12) requires FEMA to phase out Pre-FIRM (“subsidized”) rates on Non-Residential buildings used for business purposes. Starting November 1, 2015, the following changes will take effect, which will substantially increase insurance premiums on Non-Residential buildings used for business purposes.
Starting November 1, 2015, the current Non-Residential building category will be divided into two categories:
- Non-Residential Business
- Other Non-Residential
This requirement to identify business properties within the larger Non-Residential occupancy category will begin for all Non-Residential policies as they renew after November 1, 2015. Policyholders will be required to complete the Non-Residential Building Use Questionnaire for each such policy as it renews.
For rating purposes, the “Non-Residential Business” refers to a building where a licensed commercial enterprise is carried out to generate income and coverage is for one of the following:
- (a) a building designed as a non-habitational building;
- (b) a mixed-use building in which the total floor area devoted to commercial uses exceeds 25% of the total floor area within the building; or
- (c) a building designed for use as office or retail space, wholesale space, hospitality space, or for similar uses.
Properties that have been used as houses of worship, other non-profit entities, community recreation buildings and garages will be categorized as “Other Non-Residential”.
The premium increases for Pre-FIRM (“subsidized”) Non-Residential Business properties will be 25% per year as stated in the BW-12 legislation. These increases on Pre-FIRM business policies will be applied with the next set of NFIP Program changes in 2016. Other Non-Residential properties will not be affected by this rate increase as Section 5 of the Homeowners Flood Insurance Affordability Act (HFIAA) limits premium increases to no more than 18% per year on Other Non-Residential properties.
The NFIP refund rules will be changed to allow for prior-term refunds for certain cancellations and policy changes (endorsements). In such cases, refunds will be restricted to 5 years instead of 6; this is to match the Federal requirement to retain policy records for 5 years. In addition, for certain other types of policy cancellations, the NFIP will limit the premium refunds to the current policy term only.
Read full Summary of the revised cancellation refund procedures.
Read full NFIP Bulletin W-15016.