Tying Flood Insurance to Flood Risk for Low-Lying Structures in the Floodplain (2015) / Chapter Skim
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4 Factors That Affect Risk-Based Premiums for Negatively Elevated Structures
4 Factors That Affect Risk-Based Premiums for Negatively Elevated Structures
Pages 35-48
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From page 35... ...
In addition, the PELV curves were developed or above the base flood elevation. However, negatively with a focus on the difference between the 1 percent elevated structures are typically affected by different and 10 percent annual chance exceedance elevations flood conditions (e.g., more frequent floods)
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From page 36... ...
Precise hazard representation set of PELV curves in the average annual loss calcula- requires structure elevations and site-specific water surtion, the variance around that average premium can face elevation–exceedance probability functions devel TABLE 4.1 Comparison of Water Surface Elevation Differences in Different Regions Difference Between the 1 Percent and 10 Percent Annual Chance Exceedance Water Surface Elevations (feet) Percent Chance Exceedance Fayette County, TX Boulder County, CO Suffolk County, NY 0.2 4.3 3.4 1.7 1 0.0 0.0 0.0 2 –4.6 –2.5 –0.6 10 –13.9 –6.7 –2.1 SOURCES: Data from Flood Insurance Studies; see FEMA (2006, 2009, and 2012)
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From page 37... ...
In some cases, local NFIP's multi-frequency depth grids represent a step flood study reports may yield the required water surface toward site-specific hazard definition. elevation–exceedance probability functions.
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From page 38... ...
Depending on the inundation depth–exceedance tive strategies could be developed to guide selection probability function and the structure elevation, the of the appropriate category of water surface eleva- threshold annual chance exceedance value for damage tion–exceedance probability function to use for rating to negatively elevated structures may be as great as a structure. For example, a strategy similar in concept 50 percent (the 2-year flood)
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From page 39... ...
For negatively elevated structures, the PELV The contribution of small flood events to the curves would also have to reflect the relative magnitude a verage annual loss is greater in locations with smaller of more frequent events, such as the difference between differences between the 1 percent and 10 percent an- the 1 percent, 10 percent, and 50 percent annual chance nual chance exceedance water surface elevations. For exceedance depths.
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From page 40... ...
However, the claims data for face elevations -4 feet below to +4 feet above the lowest a selected depth of inundation used in this refining are floor elevation, and is greater than 1.0 for some water highly variable. For example, Figure 4.2 shows the dis- surface elevations below the lowest floor elevation.
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From page 41... ...
The data for 2005 are dominated by Hur- Potential Changes to the NFIP Method. To better ricane Katrina, which caused extensive damage in undertand the large variance in damage data, addi s L ouisiana and Mississippi. In New Orleans, where tional data on flood hazard characteristics (e.g., depth many structures behind levees are negatively elevated, and duration of flooding, flow velocity, sediment load)
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From page 42... ...
For inundation depths The NFIP credibility weighting procedure (FEMA, between zero and 5 feet, there are a sufficient number 2003) estimates damage for each specified inundation of NFIP claims data to assign full weight to the damdepth as follows:2 ages predicted with them; no weight is assigned to the USACE estimates for inundation depths in that range • If the NFIP claims sample is large enough to (Figure 4.5, top)
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From page 43... ...
(Bottom) Comparison of the NFIP claims data, USACE damage estimates, R02820 Fig 4.5 bottom.eps and the blended result using the credibility weighting methodology.
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From page 44... ...
in the rate UNDERINSURANCE formula. The loading factor adjusts the rate so that col lectively the premiums reflect the amount of expected The NFIP computes flood loss by applying the annual loss, thus protecting the NFIP from potential damage ratio from the appropriate DELV curve to the premium shortfalls as a result of underinsurance.
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From page 45... ...
The NFIP rate formula is applied to classes of proper ties, but the resulting rates are consistent with those that would be developed for classes of properties using first loss scales. negatively elevated structures are in the rate class.
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From page 46... ...
The loss costs are based on the expected annual damage amounts and do not include consideration for deductibles, loss adjustment costs, or other loadings that would go into an actual insurance rate. SOURCE: Data from FEMA (2013d)
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From page 47... ...
More consistent policyholders understand their flood risk, which could replacement cost values could improve the under lead them to purchase sufficient insurance. Possible insurance adjustment as well as other terms in the solutions to the deliberate purchase of too little insur- NFIP actuarial rate formula, such as DELV.
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From page 48... ...
The commit- premium discounts and thus lower premiums for lower tee's analysis of national claims data for single family valued properties. These higher discounts could be residences insured by the NFIP shows that increasing meaningful with the high premiums anticipated for the minimum deductible to $2,500 would have saved negatively elevated structures.
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