I received the following response from an agent today, and wondered if it deserved any merit. I haven't heard anything about what he's talking about. He's basically saying that you don't have to have continuous coverage to a preferred risk policy.

I have spoken on several occasions with Texas Farmers Insurance Flood Department Underwriters on this and other properties that have been moved to the “AE” Zone from prior “B”, “C”, and “X” Zones that did not have prior insurance. The indication is they do qualify for Preferred Rates due to a decree by President Obama that effects building and dwellings that were in a “B”, “C”, or “X” Zone between 10/01/2008 and 12/31/2010. This qualification is for two years and then they may be “Grandfathered” into the rates applicable to “AE” after two years. I currently have several POST-FIRM properties that have been issued preferred rates and I have one that was issued as “AE” and got a refund because the prior Zone was a “B” zone. In fact our rating software now prompts us to use Preferred Policy based on information used for a quote.

The building in question was built Pre-Firm and was located in a “B” Zone as shown on the application. It has been explained to me by Flood Insurance Underwriters that the new determinations show the prior zone for rating purposes. I can provide a copy of a Flood Zone Determination for your use if necessary furnished by our Food Determination company.

Yes, under prior rules, Grandfathering was for properties that had a policy in force in a “better flood zone” B, C, and X and elected to purchase coverage even though not required at the time and then a new Flood Zone was determined to be an “A” Zone at a later date.

PRE-FIRM:

Pre-FIRM (construction prior to the date of the community's initial FIRM)
1. If a policy was obtained prior to the effective date of a map change, the policyholder is eligible to
maintain the prior zone and base flood elevation as long as continuous coverage is maintained. The
policy can be assigned to a new owner at the option of the policyholder.
2. If a building is Pre-FIRM and a policy was not obtained prior to the effective date of a map change,
the applicant is eligible to receive the Pre-FIRM (subsidized) rates based on the new zone rather than
the actuarial (elevation based) rates.

Preferred Risk Policies
1. Buildings written on Preferred Risk Policies are required to be located in zones B, C, or X on the FIRM
in effect on the date of application and on the date of each subsequent renewal.
2. A building, which becomes ineligible for a Preferred Risk Policy due to a map change to a special
flood hazard area, can be rewritten on a standard rated policy using zones B, C, or X.

I don't see where any of this changed recently.

The agent is confusing two different rules. The grandfathering rule as we know is still in effect. The agent is talking about the "new" preferred risk policies that are available due to remapping. The preferred risk policy (as I understand it) does not effect the grandfathering rule at all. And they are 2 different animals all together.

Hopefully, someone will correct me if I am wrong.

Just had a lengthy discussion with a very nice and knowledgeable lady from FEMA. The 2 year preferred risk premium extension is in fact a separate animal, and it's addressed in their January 2011 Flood Insurance Manual. If building was built pre-FIRM, then they must have had continuous coverage to maintain the preferred risk premium policy. If the building is constructed post-FIRM changes, then they have eligibility to purchase a preferred risk policy without having to have maintained it pre-FIRM.

I think I have that right... I plan on reading some more about this tonight and I'll correct myself if I stated this incorrectly.

And low and behold I did have it wrong.

A building is eligible for a PRP due to the recent extension if it is build Pre-FIRM for the next two years after the FIRM change (basically, but depends on when the map was actually changed).

A building is ineligible for a PRP due to the recent extension if it is constructed Post-FIRM changes.

I have a further question about this.

One of our counties was recently remapped and one policy I received for the new flood zone was rated X because of the PRP due to the remapping. How do I document that this is an okay difference?

I need to clarify the bottom line for my brain. If the customer is not in a flood zone but has continuous flood insurance coverage and then due to a map revision is in a flood zone, his rates will stay the same because he had flood insurance previously correct? If he did not have flood insurance prior to the map revision he can purchase flood insurance for the lessor rate for 2 years before it converts to his actual flood zone. Is that correct or am I still confused? Thank you!

That is the way I read it.