NFIP Program Changes – Effective October 1, 2018

FEMA has published a memorandum announcing changes to the NFIP Flood Insurance Manual that will become effective October 1, 2018. Examples of changes applicable to new business, renewals, endorsements, and cancellations include:

1. Cancellation Reason Code 26 for Duplicate Coverage under Non-NFIP Policy
Beginning October 1, 2018, agents can use NEW Cancellation Reason Code 26* to cancel an NFIP policy when a policyholder has obtained a duplicate policy from sources other than the NFIP. The non-NFIP insurance coverage must be for building coverage on the same building that is insured by the flood policy being canceled.

  • Cancellation Effective Date: The date the cancellation request is received by the insurer.
  • Type of Refund: Pro-rata refund including ICC premium, Reserve Fund Assessment, and HFIAA Surcharge. The refund does not include the Federal Policy Fee and Probation Surcharge (if applicable).
  • Cancellation Request: Must be received within the current NFIP policy year.
  • Required Documentation: A copy of the non-NFIP policy’s declaration page and a statement from the mortgagee, if any, accepting the non-NFIP policy as the replacement.
  • Years Eligible for Refund: Current year.

2. Required Notification of PRP Eligibility for Certain Cancellation Reasons
Beginning October 1, 2018, NFIP insurers must inform eligible policyholders with standard rated policies for property in a non-Special Flood Hazard Area of their option to convert to the Preferred Risk Policy (PRP). They must inform policyholders prior to processing cancellations for the following Cancellation Reason Codes:

  • Reason Code 8 – Policy Not Required by Mortgagee.
  • Reason Code 9 – Insurance No Longer Required by Mortgagee Because Property Is No Longer Located in a Special Flood Hazard Area Because of a Physical Map Revision or LOMR.
  • Reason Code 15 – Insurance No Longer Required Based on FEMA Review of Lender’s Special Flood Hazard Area Determination.
  • Reason Code 19 – Insurance No Longer Required by the Mortgagee Because the Building Has Been Removed from the SFHA by Means of a LOMA.

To implement this requirement, NFIP insurers may develop notice requirements that align with their normal business practices. NFIP insurers must be able to demonstrate that they informed eligible policyholders of the availability of the PRP. Insurers may cancel/rewrite the policy to a PRP using the current cancel/rewrite procedures outlined in Cancellation Reason Code 22 or 24, as appropriate.

3. Extended Eligibility for Newly Mapped Rating Procedure
FEMA is extending the time period for properties newly mapped into an SFHA to be rated using the Newly Mapped rating procedure instead of going immediately to full-risk (actuarial) rating.

Currently, properties newly mapped into an SFHA are eligible for the Newly Mapped rating procedure if the applicant obtains coverage that is effective within 12 months of the map revision date.

  • Effective October 1, 2018, FEMA is expanding eligibility to be either
    • within 12 months of the map revision date or
    • within 45 days of initial lender notification if the notification occurred within 24 months of the map revision date.

In these cases, the Newly Mapped multiplier to be used for premium calculation should be based on the map effective date and the policy effective date for that new business transaction.

* Contents-only policies are not eligible for Cancellation Reason Code 26.

IIAT Advantage offers flood insurance through Assurant Flood Solutions and Selective. For more information contact Polly Middlebrook at 512.493.2425.


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