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The Federal Emergency Management Agency (FEMA) has released guidelines for how flood insurance rates will be calculated under the Biggert-Waters Act of 2012. Flood insurance rates are based on a number of factors, including the elevation of the lowest floor of the building, the type of building, the number of floors, whether a building has a basement or enclosure, use of flood mitigation techniques such as breakaway walls and flood vents, and the property's geographic location in reference to flood hazards identified by the community and FEMA.
Insurers historically used these guidelines to calculate premiums for a variety of properties with a high risk of sustaining flood damage, particularly rates for buildings where the lowest floor elevation is below the Base Flood Elevation (BFE). In the past, many properties built below the BFE and before Flood Insurance Rate Maps (FIRMs) and minimum floodplain management requirements were adopted in community ordinance (known as pre-FIRM properties) received subsidized premium rates that were lower than true risk. BW-12 requires FEMA to immediately eliminate subsidies for certain properties, such as property purchased after BW-12 was enacted, property insured by policies that have lapsed or were purchased after BW-12 was enacted. These properties may now be rated using the Specific Rating Guidelines. The new tables and underwriting procedures in the Specific Rating Guidelines reflect those mandated changes.