It’s only April, but 2014 has already seen plenty of waves from the flood market. And because it’s linked to governmental regulations that are constantly changing, industry leaders are finding it difficult to predict upcoming flood developments.

“Clearly, the events over the last several years—Hurricane Irene, Superstorm Sandy and a whole mess of Midwestern thunderstorms—have created disruption in the marketplace,” says Jim Fiske, U.S. marketing manager for Chubb Personal Insurance.

Pricing Trends

Cassie Masone, vice president of flood operations at Selective Insurance Company of America, notes that flood pricing is dictated by FEMA, which implements rate changes in June, October or both. “There are no planned rate changes for June, and at this point, FEMA has not indicated any specific rate increases for the remainder of 2014,” she says. “But this is always subject to change.”

As the government attempts to find a solution to rising cat losses, pricing in high-risk areas will continue to adjust accordingly. “As far as we can tell, the pricing within special flood hazard areas is going to increase to become full-risk rate,” says Jeff St. John, Big “I” Flood specialist. “That’s really what FEMA is focused on: becoming fiscally sound and making sure all their properties are at the full-risk rate.”

On the Horizon

For the rest of the year, agents will need to keep a close eye on Washington. “The political environment has a direct impact on the Flood program,” says Masone, who notes the Consolidated Appropriations Act of 2014 as an example. Commonly referred to as the Omnibus, the law was signed by President Obama on Jan. 17 and prohibits FEMA from using funds to implement a Biggert-Waters provision that would adjust premiums of properties affected by revised or updated flood insurance rate maps.

“Because of this, FEMA is in a holding pattern with implementing Section 100207,” Masone explains. “Many insureds are uncertain as to the potential impact on their policy premiums.”

That means advocacy for flood clients will become more crucial than ever—in more ways than one. “Part of what we’re seeing with the government program is this realization that they’ve been undercharging for a long time,” Fiske says. “That causes problems for the customers that thought they were paying the right amount, and now they’re finding out they need to pay two or three times more.”

President Obama recently signed into law H.R. 3370, the Homeowner Flood Insurance Affordability Act of 2014. The new law amends several unintentionally harmful provisions of Biggert-Waters, and although implementation will not occur until FEMA releases guidance, the agency has indicated it will act soon. The Big “I” strongly encourages agents and brokers to continue with any and all renewals before a coverage lapse occurs, and suggests they not wait for implementation of the new law before proceeding with renewals.

But while the fluctuating legal environment renders enduring trends largely unpredictable, one big-picture development is certain. “Technology is improving dramatically,” Fiske says. “Not only does the government update their maps, but the ability of private parties to start bringing big data to bear in terms of evaluating flood exposure bodes well for the marketplace in the long term.”

For more on how the new flood law will affect you and your clients, keep an eye on Independent Agent magazine, IAmagazine.com and upcoming issues of Markets Pulse.

Jacquelyn Connelly is IA assistant editor.