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Flood Insurance Questions with Complete Solutions
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Flood Insurance Questions with Complete Solutions
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Flood Insurance Questions with Complete Solutionswhat is the main provider of residentialo flood insurance in the US CORRECT ANSWER national flood insurance program
who is responsible for the NFIP CORRECT ANSWER FEMA
what is causing the private market to be interested in providing flood insurance CORRECT ANSWER advances in analytics & data used to quantify flood risk
increses in capital market capacity
objectives of NFIP CORRECT ANSWER provide access to primary flood insurance (to transfer risk from property owners to fed gov)
mitigate flood risk via the devolopment & implementation of floodplain management standards
longer term objective to reduce federal expenditure on disaster assidtance after floods
social goals of NFIP CORRECT ANSWER provide flood insurance in flood prone
areas to property owners who would otherwise be unable to obtain it
reduce government's costs after floods
non insurance activities of NFIP CORRECT ANSWER provides flood risk information via flood maps
requires that communites abide by land use building code standards
potentially reduces need for other post-flood aid
supports community resiliance by funding rebuilding after flood
protect lending organizations against default losses due to uninsured losses
when is flood insurance mandatory CORRECT ANSWER mandatory for property onwers located in special flood hazard (SFHA) area if mortgage is backed by federal government
who is responsible for enforcing flood insurance coverage CORRECT ANSWER mortgage providers where can property owners purchase flood insurance from CORRECT ANSWER NFIP
Private insurers
what are the NFIP coverage limits CORRECT ANSWER single family dwellings: 250K for building coverage/100K for contents
other residential buildings 500K for building coverage/100K for contents
Non-residential buildings: 500K for building coverage/ 500K for contents
properties that do not pay actuarial rates CORRECT ANSWER Pre-Firm: properties build or improved before later of 12/31/1974 or the date in which FEMA
published a FIRM for their community
Newly mapped: properties mapped into a SFHA on or after 4/1/15 where the applicant purchases coverage effective within 12 months of being placed in SFHA
Grandfathered: properties built in compliance with the FIRM that was in effect at the time of consturction can maintain their original flood insurance rate class if the property is mapped into a new class
how can private insurers participate in flood insurance market CORRECT ANSWER administer NFIP
sharing risk with NFIP
assuming the risk as a primary insurer
assuming risk as a reinsurer
how do private insurers provide administrative services to NFIP CORRECT ANSWER direct servicing agent (DSA): sells NFIP policies on behalf of FEMA for property owners that want to purchase insureance directly from the NFIP
write-your-own: private insurers issue & service NFIP policies. They are compensated for their services.
NFIP retains the risk in both cases
what did the homeowner flood insurance affordability act of 2014 do.? CORRECT ANSWER congress authorized FEMA to purchase reinsurance for NFIP from the private insurance market
what are the reasons for the homeowner flood insurance affordability act of 2014 CORRECT ANSWER purchasing reinsurance from the private market would reduce the change that FEMA would need to borrow money from the treasury
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