Handling Repetitive Loss and Severe Repetitive Loss

In the realm of the National Flood Insurance Program (NFIP), certain properties represent a disproportionate amount of total claim payments. These are categorized as Repetitive Loss (RL) and Severe Repetitive Loss (SRL) properties. Understanding how these designations are applied, and the mitigation requirements associated with them, is a critical component of the complete Flood exam guide.

The primary objective of identifying these properties is to reduce the long-term risk to the National Flood Insurance Fund. When a property is repeatedly damaged by rising water, the NFIP and local communities prioritize it for mitigation efforts, such as elevation, relocation, or acquisition (buyouts). For insurance professionals, managing these risks involves understanding policyholder surcharges, eligibility for specific grants, and the triggers that move a property from standard status to a heightened loss category.

To prepare for specific scenarios regarding these properties, students should engage with practice Flood questions to master the calculation of claim thresholds and timeframe requirements.

A property is officially designated as a Repetitive Loss (RL) property when it meets specific claim history criteria. Under the standard NFIP definition, this involves a property that has incurred flood-related damage on two or more occasions within a rolling decade, where the cost of the relevant repairs equaled or exceeded twenty-five percent of the value of the structure on average.

However, for the purposes of community mitigation and the Community Rating System (CRS), the definition is often simplified: a property that has received at least two claim payments of over one thousand dollars each within any rolling ten-period span. Key points to remember for the exam include:

• The claims must be for separate flood events.
• The property remains on the RL list even if it changes ownership, as the designation follows the structure, not the policyholder.
• RL properties are often the focus of local floodplain management ordinances that require "substantial improvement" rules to be triggered more easily.

The Severe Repetitive Loss (SRL) designation is reserved for the most high-risk properties in the NFIP portfolio. There are two distinct paths to receiving an SRL designation for residential properties:

• Frequency Path: Four or more separate flood claim payments (including building and contents) have been made, with each claim exceeding five thousand dollars.
• Severity Path: At least two separate flood claim payments (building payments only) have been made, where the cumulative amount of those claims exceeds the market value of the building.

For SRL properties, the NFIP implements stricter rating structures and mandates. These properties are often subject to the Flood Mitigation Assistance (FMA) grant program, which provides federal funding to help owners permanently reduce the flood risk. It is important to note that if an owner refuses a formal offer of mitigation (such as an offer to elevate the home), their insurance premiums may increase drastically, sometimes by double or triple the standard rate.

A vital tool in handling repetitive loss is Increased Cost of Compliance (ICC) coverage. This is part of the Standard Flood Insurance Policy (SFIP) and provides up to thirty thousand dollars to help cover the cost of mitigation measures required by local floodplain management ordinances.

To qualify for an ICC claim, the property must be declared "substantially damaged" or meet the local community's repetitive loss definition. The funds must be used for one of the four approved mitigation activities:

• Elevation: Raising the structure above the Base Flood Elevation (BFE).
• Relocation: Moving the structure to a safer location on the same lot or a different lot.
• Demolition: Tearing down the damaged structure.
• Floodproofing: Primarily for non-residential structures, making the building watertight.

Note that ICC is only available when a community makes a formal declaration that the building must be brought into compliance with current codes. It cannot be accessed simply because a policyholder wishes to elevate their home voluntarily.