Last month, Brad Kieserman, an administrator with the Federal Emergency Management Agency (FEMA), appeared before the U.S. Senate Committee on Small Business and Entrepreneurship to report on the impact of National Flood Insurance Program (NFIP) reforms on small businesses. Regardless of business size, if you own, operate or represent commercial property subject to flood insurance requirements, Kieserman’s comments underscore the importance of being diligent about flood risk. Here are a few noteworthy takeaways and excerpts.
On October 1, 2013, the subsidized rates for these pre-Flood Insurance Rate Map (pre-FIRM) buildings began to phase out. At renewal, non-residential policyholders received a 25 percent rate increase. As required by both BW12 and HFIAA, the 25 percent rate increases are set to continue until rates reflect the property’s true risk. However, a provision of HFIAA temporarily slows that rate of increase. … Until FEMA begins to separately classify businesses on April 1, 2016, all non-residential properties-including businesses-will receive no more than an 18 percent annual increase.
Increasing fixed costs for expenses such as flood insurance can have a negative impact on small businesses. While FEMA encourages all business owners to avoid locating a business on property susceptible to high or moderate risk of flooding, the NFIP recognizes that this is not always feasible for a variety of reasons. However, there are ways in which businesses can mitigate their flood risks and lower their insurance premiums.
… Starting November 1, 2015, the NFIP will have a new classification for business. Previously, all non-residential properties were classified in one category that included business, non-profits, houses of worship, and garages. Once the business category is established, the WYO companies will work with the NFIP to re-underwrite an estimated 290,000 policies upon renewal. Some portion of the 290,000 properties currently classified as non-residential policies will be reclassified as business properties.
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