Statutory Discounts

Statutory discounts are legislated incentives within the NFIP designed to encourage participation and ensure affordability for policyholders while they transition to full risk rating.

• Encourage participation in the NFIP, especially during its early stages.
• Provide benefits for communities transitioning into the regular NFIP program.

Statutory Discount Glide Path

The glide path is a phased approach used to gradually eliminate subsidies provided through NFIP statutory discounts. Under this method, policyholders see annual premium increases capped at 18–25%, ensuring a manageable transition from lower premiums to actuarial-based pricing while maintaining affordability over time.

• Annual increase caps prevent steep rate hikes.
• Capped rate increases balance affordability with transitioning to actuarial rates.
• Lapses in coverage result in losing discounts.
• Transition scenarios include:
  • Moving from buildings under construction to finished structures.
  • Loss of statutory benefits after coverage lapse.

Statutory Discount Types

Pre-FIRM Discounts

The Pre-FIRM discount applies to buildings constructed before the community's FIRM effective date, marking its participation in the NFIP's regular program. Buildings are designated as "Pre-FIRM" if constructed prior to this date and "Post-FIRM" if built after, with the discount gradually phased out through the glide path as premiums transition to actuarial-based pricing.

• Applies to buildings constructed before a community joined the NFIP.
• Based on Flood Insurance Rate Maps (FIRMs).
• Transitioning to actuarial-based pricing under Risk Rating 2.0.
  • Phased out via "glide path" methodology with capped annual rate increases (18-25% per year).
  • Aim to gradually eliminate subsidies over time.

Newly Mapped Discounts

• Applies to properties reclassified from low-risk to high-risk areas.
• Allows gradual premium increases using the glide path.
• Ensures affordability as homeowners transition to mandatory flood insurance requirements.

Real Estate Transaction Discounts

• Transferable discounts for properties insured under an NFIP policy and sold within the last year.
• Replaces legacy grandfathering systems.
• No prior declarations page required; proof is shown via settlement documents or deeds.

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