U.S. Department of Homeland Security 
Washington, DC 20472
FEMA

National Flood Insurance Program
Underwriting Bulletin Effective October 1, 2004 

Subject: Conversion of a Standard Rated Policy to a Preferred Risk Policy Due 
to a Map Revision or Letter of Map Amendment/Letter of Map Revision

Background: NFIP rules allow a standard rated policy to be rewritten to a Preferred Risk 
Policy (PRP), with a premium refund for the current year, as long as the building was 
eligible for the PRP at the beginning of the current policy term. If the building becomes 
eligible for a PRP mid-term, due to a map revision or Letter of Map Amendment/Letter 
of Map Revision (LOMA/LOMR), the standard rated policy cannot be rewritten to a PRP 
until the next renewal. Policyholders in such circumstances, who are no longer required 
to carry flood insurance by their mortgagees, are likely to cancel their standard rated 
policies to obtain a full premium refund rather than endorse to a B, C, or X zone, where 
depending on how the policy is rated, may or may not receive a premium refund.
 
The Institute for Business and Home Safety (IBHS) Flood Committee, the WYO 
Marketing Committee, and the Flood Insurance Servicing Companies Association of 
America (FISCAA) have requested that we revise the current NFIP rules that will allow 
the writing company to offer the insured the option to cancel and rewrite the standard 
rated policy to a PRP with the same effective date, and to allow the use of the premium 
previously paid on the standard rated policy to rewrite the PRP. They feel that this 
approach will encourage many property owners to retain their flood policies and continue 
their coverage without a lapse. They also pointed out that this suggested rule change 
could help attain the program’s goal of increasing the NFIP policies by five percent.

FEMA also received a request from California’s Sacramento Area Flood Control 
Agency (SAFCA) informing us that an upcoming map revision in Sacramento 
communities may result in removing approximately 50,000 structures from the SFHA. 
They are concerned that these property owners may choose to cancel their policies mid-
term if the cancel/rewrite to a PRP option is not available. SAFCA is planning to launch 
their flood insurance outreach campaign regarding this option if the rule change is 
implemented by the NFIP. 

Decision: FEMA understands the challenge of encouraging property owners to purchase 
or maintain their flood insurance when their buildings are removed from the SFHA due to 
a map revision or LOMA/LOMR. Therefore, effective October 1, 2004, the WYO 
companies and the NFIP Direct Servicing Agent will be allowed to convert the existing 
standard rated policy to a PRP, with the same effective date, due to a map revision or 
LOMA/LOMR. The premium previously paid on the standard rated policy will be used to 
rewrite the PRP with any excess premium refunded following the issuance of the new 
PRP. This rule applies to the current policy year and one prior year provided that the 
effective date of the map revision or LOMA/LOMR occurred during the prior year. The 
current cancel/rewrite procedure applies in determining the eligibility, documentation 
requirement, coverage, TRRP reporting, and agent’s commission (Direct Business) and 
expense allowance adjustment as outlined in the PRP and Cancellation Sections of the 
Flood Insurance Manual.
 
In order for policyholders to be able to take advantage of this new rule, we are requiring 
the writing company to revise their cancellation processing procedures to ensure that this 
option is offered to policyholders before processing their cancellation request. A form 
must be developed and sent to qualifying policyholders explaining the option of 
converting the standard rated policy to a PRP. The policyholders must make their 
selection on the form and sign, whether to rewrite it or cancel it, and return this to the 
company. If the form is not returned within 30 days the policy will be cancelled.
 
We recognize that this is an additional effort on the part of the companies to 
implement this new processing requirement by October 1, 2004. However, because of 
the Sacramento, California, re-mapping, which is scheduled before the end of this 
year, it is important that we make this option available as soon as possible. 

If you have any questions concerning this Underwriting Bulletin, please contact 
your Program Coordinator. As necessary, we will provide supplementary guidance 
to all companies based on questions that are received. Once again, your cooperation 
and assistance in carrying out this requirement is appreciated.
 
Donald R. Beaton, Jr. Chief Underwriter Underwriting 
Section Risk Insurance Branch Mitigation Division
8/10/04
Date