Last week’s order by New Jersey’s governor standardizing the rebuilding codes along the state’s coast in the wake of Superstorm Sandy will help speed the process of rebuilding, but agents say property owners are just beginning to learn the implications it may have on their reconstruction decisions.
On Thursday, Jan. 24, New Jersey Gov. Chris Christie issued an emergency regulation aimed at helping property owners rebuild to a uniform standard throughout the state by adopting the Federal Emergency Management Agency’s Advisory Base Flood Elevation.
Under the standard, property owners will need to build to construction requirements for a 100-year flood. Buildings will have to be rebuilt to the height standards outlined under the ABFE map, plus an additional foot to come into compliance with state law.
Non-residential property owners will be allowed to build wet flood proofing structures, which means the structure is designed to flood without affecting the building’s integrity.
The order affects 194 coastal communities in 10 counties along the New Jersey shore. According to the maps, in some areas homeowners could be required to build to a height of 19 feet.
Cappy Stults, owner and president of insurance agency Allen & Stults in Hightstown, N.J., says his firm began initiating conversations about the process long before the governor’s announcement. He says he has been telling homeowners that they need to wait for decisions at the federal, state and municipal levels before deciding to make repairs or rebuilding.
According to one diagram laid out by FEMA under the 2012 Flood Insurance Reform Act, which requires rates to rise as high as 25 percent over the next five years, an individual could save more than $90,000 over 10 years if he or she were to build three feet above base-flood elevation.
Flood maps are subject to change, says Stults, and he is urging clients planning to rebuild to do so at a height of three feet above the ABFE.
Chris Grasso, vice president of personal lines for Liberty Insurance Associates Inc. in Millstone, N.J., says that the governor’s decision has taken any ambiguity out of the process of rebuilding.
“You are going to have to make changes,” he says.
Without those changes, he continues, homeowners can expect to pay substantially higher premiums or be unable to obtain insurance because they have not met the minimal requirements FEMA has set-out.
“No one should rush out and rebuild until they know what the flood requirements are because the result would be extreme and immediate,” notes Andrew C. Harris, president of Liberty Insurance.
Harris notes that the governor’s order gives insurers better understanding about underwriting the risks because they now understand they will be writing wind polices for homes that are built to more stringent code.
Micael Isler, assistant vice president for The Property Casualty Insurers Association of America, underscored this point, saying, “The enactment and enforcement of tough standards for building codes, property development and other loss prevention and mitigation requirements are a key component to long-term natural catastrophe preparation.”
Julie Rochman, president and chief executive officer for the Insurance Institute for Business & Home Safety, says that it is important for the governor to act quickly because “people want some return to normalcy.”
However, the cost of mitigation will not come cheap, adding between $30,000 and $60,000 to the cost of rebuilding the home, says Rochman, according to the governor’s figures. However, by getting out ahead on this issue, New Jersey will avoid “the stark delineation between what was thrown-up and those [buildings] that were built to code” post-Hurricane Katrina in New Orleans.
Harris says that Sandy has accelerated the process of getting the ABFE out to the public and that has been a headache of sorts for agents. Usually, there is a six month period of education for consumers, he says. However, to get the details out to municipalities and professionals as quick as possible, the consumer process was skipped, leaving it to agents to educate their clients.
As the re-building process moves forward, property owners will have their insurance settlement and mitigation grant money from the federal government to help, but ultimately, the cost will be on the shoulders of the homeowner, says Harris.
And the shore is facing a landscape that may never be the same. Stults notes that it will be a long rebuilding process for the area.
“There are those homeowners with rentals that want to get their houses ready for the summer of 2013,” he says. “I tell them to think. The summer of 2013 is lost; think about 2014.”