In 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act (BW-12). According to, the law’s components seek to sustain the National Flood Insurance Program by phasing out subsidies (payment assistance), thus reflecting the full risk of flooding in high risk zones.

In order to determine how this law will affect homeowners, home buyers, and real estate agents, it is important to distinguish properties by whether or not their policyholders are paying full risk premium rates or subsidized rates, their flood zone location, and the structural elevation of properties.

Policyholders paying full-risk premium rates (not subsidized)

  • 80% of policyholders (4.48 million) nationally are paying full risk premium rates and will not see large premium increases.

  • As of 12/31/2012 in Honolulu County, Oahu, there are 29,057 policies being paid at full-risk premium rates and therefore, will not see large premium increases.

Policyholders paying subsidized rates

  • 20% of policyholders (1.12 million) nationally are paying subsidized rates.

  • 5% of policyholders (252,851) are businesses, non-primary residences, and severe repetitive loss properties who will see an immediate subsidy phase-out (25% annual increase until full premium is met).

  • 10% of policyholders (578,312) are primary residences with subsidized rates and will retain their subsidy, seeing no immediate increase unless the property is sold to a new owner or their policy lapses.

  • 4% of policyholders (244,085) are condos and multifamily properties receiving a subsidized rate and will keep their subsidies at this time.

  • In Honolulu County, Oahu, there are 8,218 policyholders paying a subsidized rate who may be affected by a subsidy phase-out.

Flood Zones/Flood Insurance Rate Map (FIRM)

  • Policyholders who are paying full-risk premium rates and are not affected by a subsidy phase-out, may still have their premium rates affected by remapping. According to, the changes seen by this provision will occur in the latter half of 2014.

  • For example, if flood zone remapping occurs and a property is moved from a lower risk zone to a higher risk zone, that property’s insurance rate will  increase.

Structural Elevation

  • In order to obtain a lower premium rate within a high risk flood zone, the structural elevation of the property must be higher than the Base Flood Elevation (BFE) of the area. The higher the elevation, the lower the rate. Therefore, a property’s premium rate can be determined by obtaining an Elevation Certificate completed by an engineer or surveyor.

  • Properties built before the implementation of their community Flood Insurance Rate Map (FIRM) and minimum standards for new construction face both the phasing out of subsidies and higher rates due to their low structural elevation.

  • In addition, newer properties built to the standards of their current zone, but face potential rezoning to higher risk areas, may see increased rates as well.

The increasing costs of flooding disasters led Congress to pass the Biggert-Waters Flood Insurance Reform Act of 2012 whereby subsidies are phased out and full risk payments are phased in. Although only 5% (252,851) of subsidized policyholders will see an immediate 25% annual increase, other subsidized homeowners whose properties are their primary residence must be aware of the changing insurance cost to home buyers when it comes to selling their homes. Home buyers need to be cognizant of the possibility of increased flood insurance rates in their monthly payments. In Hawaii, the most common flood zones are AE and VE and can be found on a property’s MLS listing. When getting pre-qualified for a home in these zones, it is important that the home buyer’s loan officer accounts for new rates. Real estate agents must educate their clients on all the intricacies of buying a home in a flood zone.

The changes made by flood insurance reform will make a significant impact on the insurance rates of businesses, rental homes, subsidized homes on the market, homes that are below structural elevation standards, and on homes that could be remapped to higher risk flood zones.