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Flood Insurance

Premium Reduction Service Increases Industrial Property’s Value By $71,300

Our client, a large commercial real estate company, owned a single structure multi-tenant industrial building. The insured was maintaining one NFIP policy that was coming up for renewal. The lender’s flood zone determinations showed that the building was in a Special Flood Hazard Area (SFHA: zones beginning with the letter A or V). The client was concerned over the rapidly increasing flood insurance premium and was looking for ways to reduce it.

The Solution

Our industry-leading flood team quickly determined that there were more favorable rates available for this building. We obtained elevation certificate for this building that  enabled us to re-rate the flood policy using the lower cost rate structure available through the NFIP. By leveraging our flood expertise, we delivered substantial future savings and increased property values.

The Results

  • Reduced total annual NFIP costs by $5,000 (86%);
  • Increased property value by $71,300, based on the application of a 7% capitalization rate;

Download this case study in .pdf.

Flood Zone Correction Reduces Multifamily Property Annual NFIP Costs by $16,750

Our client, a retail insurance agency, had an insured with a portfolio of multifamily properties in Florida. The insured was maintaining NFIP flood insurance policies on 21 buildings. 20 of the buildings were located in Special Flood Hazard Areas (SFHA: flood zones beginning with letter A or V). The client was concerned over the rapidly increasing flood insurance premiums and was looking for ways to reduce them.

The Solution

We performed a thorough flood risk analysis and found that 18 buildings were not at high risk of flooding during 100-year flood events. Therefore, they had been wrongly included in the SFHA. We worked with FEMA to successfully remove these properties from the high-risk flood zones and to reclassify them into the correct low-risk flood zones, where they should have been in the first place.

The Results

  • 85% of the buildings were removed from the SFHA (18 out of 21);
  • $16,750 reduction in annual NFIP costs;
  • $240,000 increase in property values, based on the application of a 7% capitalization rate.

Download this case study in .pdf.


Agency Flood Resources at Flood Risk Orlando – Business Insurance Masterclass

Agency Flood Resources was honored to present at the inaugural Business Insurance masterclass – Flood Risk Orlando. This one-day conference was held on March 23, 2017 in Orlando, FL and featured leading insights in flood risk and insurance from national experts and regional thought leaders.

The event brought together over 100 commercial insurance professionals to discuss the current conditions of flood insurance, and predict the future of the flood market. The attendees explored how brokers and agents can navigate the NFIP, private market options and risk management tools to improve their flood practices and better serve their clients.

Dan Freudenthal, President at Agency Flood Resources, shared his insights on the topic of “Overcoming client obstacles: Communicating risks, requirements and rates”. During the session, panelists discussed the factors that most complicate the communication of risk, and how they can be minimized. They also examined what changes will allow the private flood insurance market and the NFIP to operate to better protect insureds.

Mr. Freudenthal was presenting together with David Maurstad, Assistant Administrator Federal Insurance at FEMA and Del Schwalls, President at Schwalls Consulting. The session was moderated by Blake Lovvorn, Assistant Director, Risk Management at University of Central Florida.

As a nationally recognized expert and thought leader in the area of flood risk, Mr. Freudenthal has been an active speaker at risk management and commercial real estate conferences about the topics of flood risk, flood insurance, flood zone correction and elevation certificates, and has published numerous articles in commercial real estate, risk management and insurance industry publications.

Flood Zone X – Not as Safe as You Think

Communities depend on dams, levees and floodwalls to minimize the risk of flooding. Nationwide, the number of dams built for the purpose of flood control is as high as 16,179, along with approximately 22,000 levees and 15,000 floodwalls, according to the U.S. Army Corps of Engineers (USACE) National Inventory of Dams and National Levee Database.

Many of those dams, levees, and floodwalls are considered primary flood control structures and must abide by the modeling outlined in the flood control manuals during the rainy season. The modeling is designed to ensure that there’s ample space in the reservoirs to capture heavy river flows and mountain runoff, and to prevent catastrophic flooding downstream. However, many dams, levees, and floodwalls have not been properly maintained and/or follow flood control manuals that have not been updated for decades, and use outdated climatological data and runoff projections. Additionally, limited funding for maintenance and upgrades compounds the risk. For example, only 7.5% of the levees that have been inspected were rated as “acceptable”.

You might ask why is this relevant to me? The answer is because most areas protected by dams, levees and floodwalls are shown as X zones on FEMA flood maps. This means that the owners of most homes and buildings protected by dams, levees, and floodwalls do not maintain flood insurance and may not even be aware that their home or building is protected dam, levee or floodwall. Since so many dams, levees and floodwalls have not been properly maintained, or may be following outdated flood control manuals, you most likely have clients with substantial uninsured flood risk.

Last year was the first year that more than two inland flood events caused losses exceeding $1 billion each. Hurricane Matthew in October and Louisiana flooding in August topped $10 billion each, Houston flooding in April caused losses estimated at $2.7 billion, Sabine River Basin flood in East Texas and Louisiana in March were $1.3 billion, and West Virginia flash and riverine flooding in June topped $1 billion. Interestingly, most of these flood events occurred in X zones.

What’s interesting about Louisiana flash flood in August is that the storm causing the flooding was not even a tropical depression, but the lowest level a tropical system there can be. Yet, more than 10 rivers had reached record levels. It is estimated that nearly one-third of all homes (approximately 15,000 structures) in Ascension Parish were flooded after a levee along the Amite River was overtopped. With an estimated 146,000 structures damaged in the flooding, it was characterized as the worst US natural disaster since Hurricane Sandy in 2012.

Last year, the average annual precipitation in the 48 contiguous states was almost two inches higher than the long-term average. We believe that the recent trend of greater precipitation and a higher number of catastrophic flood events in X zones will continue in the future.

If you are thinking that this is a recipe for disaster, you are correct. We encourage you to be proactive and take steps to identify those homes and buildings owned by your clients that are at much higher flood risk than the FEMA’s flood map portrays. Do not wait for a catastrophic event to impact your clients and your agency. Contact us today to learn how we can help you identify those homes and buildings that may be at a higher risk than you or your insured think. We will provide the information you need to implement a targeted flood insurance sales campaign to the right clients.

Clear Communications and the FEMA Letters on Flood Risk to NFIP Policyholders

The Homeowner Flood Affordability Insurance Act (HFIAA) requires FEMA to clearly communicate full flood risk determinations to individual property owners (Section 28, Clear Communication of Risk). Therefore, starting January 2017, NFIP policyholders will be receiving the letters directly from FEMA as notification that a review of their property’s flood risk has been done. In order to better reflect the risk and circumstances, FEMA created 7 different categories of letters, labeled A-G:

  • LETTER A – Buildings Newly Mapped Into A High-Risk Flood Area (view sample .pdf);
  • LETTER B – Buildings Standard-Rated, And Outside of the High-Risk Flood Area (view sample .pdf);
  • LETTER C – Buildings Grandfather Rated, And In A High-Risk Flood Area (view sample .pdf);
  • LETTER D – Primary Residential Pre-FIRM Buildings In A High-Risk Flood Area, Paying A Discounted Rate (view sample .pdf);
  • LETTER E – Non-Primary Pre-FIRM Buildings In A High-Risk Flood Area, Paying A Discounted Rate (view sample .pdf);
  • LETTER F – Buildings Mapped Outside Of A High-Risk Flood Area, And Insured With A Preferred Risk Policy;
  • LETTER G – Buildings That Are post-FIRM, In A High-Risk Flood Area, And Paying A Rate Based On True Flood Risk.

HFIAA requires NFIP flood insurance companies to do a new flood determination on every home or building on which they write a flood insurance policy. The new determinations are based on the current FEMA flood map. This may result in an incorrect rating change to the flood insurance policies of your clients, which have been correctly rated based on a prior version of the FEMA flood map. If your clients call you about a rating change to their flood policies, we encourage you to contact us immediately so that we can determine whether or not the rating change is correct.

Click here to learn more about FEMA letters.

A Multifamily Company Saves $135,000 on Annual NFIP Costs

A retail agent had an insured with a portfolio of multifamily properties. The insured was maintaining NFIP flood insurance policies on 42 buildings at 4 locations. The lender’s flood zone determinations showed that the buildings were in Special Flood Hazard Areas (SFHA: zones beginning with the letter A). The client was concerned over the high flood insurance premiums and was looking for ways to reduce them. The retail agent was looking for savings opportunities and asked us for help.

We completed a comprehensive flood risk analysis and determined that 7 buildings on two properties were not at high risk of flooding during 100-year storms. These 7 buildings had been incorrectly classified in the SFHA. We worked with FEMA to successfully remove all 7 buildings from the high-risk flood zone and to reclassify them into a low-risk flood zone, where they should have been in the first place. By leveraging our flood zone correction expertise and capabilities, we delivered five valuable benefits to the insured: (1) eliminated lender’s flood insurance requirement, (2) maximized the flood coverage afforded under the insured’s master property insurance policy, (3) delivered substantial future savings, (4) captured a large insurance refund, and (5) increased the value of the property.

In addition, through the flood risk analysis process we were able to identify more favorable rating options for buildings on two other properties. This allowed us to deliver three valuable benefits: (1) future savings by greatly reducing the annual NFIP premiums, (2) a large insurance refund, and (3) an increase to property values.

• Successfully removed 7 buildings from the SFHA;
• Reduced total annual NFIP costs by $135,191 (71%);
• Procured a $94,674 flood insurance refund;
• Increased property values by $1.9 million, based on the application of a 7% capitalization rate.

Click here to download this case study in .pdf.

Freddie Mac’s Guide Bulletin Highlights Changes to Flood Insurance Requirements for Multifamily Properties

Recently, Freddie Mac published a new Bulletin for the Multifamily Seller/Servicer Guide that addresses some flood insurance requirement changes for multifamily properties. This includes revisions to their flood insurance requirements, as well as an update on maximum deductible allowance to reflect current market conditions. Changes are effective on or after January 1, 2017 and applicable to both new loan submissions and insurance renewals for existing loans.

Changes to Flood Insurance Requirements

The Multifamily Seller/Servicer Guide updates include the requirement that all Multifamily Sellers and Servicers must meet the minimum requirements of the Federal flood insurance statutes, since many of them are regulated by Federal financial regulatory agencies. It also includes provisions for Borrower contents and business personal property, and an exemption of certain low-value, detached structures (such as sheds and carports) from the mandatory flood insurance coverage requirements. As stated in the Bulletin, the following changes to requirements for mandatory flood insurance coverage requirements are:

  • Officially cite the Federal Flood Insurance Statutes as part of our Guide to foster consistency related to mandatory purchase requirements;
  • Add coverage requirements for Borrower contents and personal property located within buildings in Special Flood Hazard Areas (SFHAs) requiring coverage;
  • Allow exemption for low-value structures meeting the definition of detached structures under the Federal Flood Insurance Statutes;
Updates on Maximum Deductible Allowance

As stated in the Bulletin, the maximum deductible allowance is updated to reflect current market conditions for blanket flood policies, and to state that when NFIP policies are used to provide part of the flood insurance coverage, the maximum deductible available under the NFIP is acceptable.

Read the full Freddie Mac Bulletin here (.pdf).

April 1, 2017 NFIP Program Changes Bring Further Premium Increases

April 1, 2017 NFIP changes comply with the requirements of the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) and Homeowners Flood Insurance Affordability Act of 2014 (HFIAA). The changes bring further premium increases and rating clarifications on properties newly mapped into the Special Flood Hazard Area (SFHA), as well as Pre-FIRM substantially improved buildings.

Increase to Premiums and Surcharges

Beginning April 1, 2017, premiums will increase from an estimated average of $827 per policy to $878, for an average increase of 6.3%, according to FEMA. These amounts do not include the HFIAA surcharge or the Federal Policy Fee (FPF). When the HFIAA surcharge and FPF are included, the total amount billed the policyholder will increase from $953 to $1,005, for an average increase of 5.4%. Annual premium rate increases for some classes of policies are as follows:

  • Premium rates for four categories of Pre-FIRM subsidized policies – non-primary residential properties, business properties, Severe Repetitive Loss (SRL) properties (which includes cumulatively damaged properties), and substantially damaged/substantially improved properties must be increased 25% annually until they reach full-risk rates;
  • The average annual premium rate increases for all other risk classes are limited to 15% while the individual premium rate increase for any individual policy is simultaneously limited to 18%;
  • The average annual premium rate increase for all other Pre-FIRM subsidized policies not covered by the first bullet above must be at least 5%.

Updated Multiplier Tables for Properties Newly Mapped into the SFHA

For calculating the premiums for properties Newly Mapped into the SFHA through December 2018, the PRP multipliers are tied to the date the property was newly mapped into the SFHA and the date of renewal. For the first year, these properties receive a PRP rate, while their subsequent premiums increase to full risk rates over time by using the PRP multiplier.

Rating Clarifications for Pre-FIRM Substantially Improved Buildings

According to FEMA Bulletin Summary, policies on substantially improved buildings must be rated based on the FIRM in effect at the time of reconstruction. Once the building has been substantially improved, all subsequent losses on that building will be adjusted based on the coverage limitations that apply for Post-FIRM buildings in SFHA.

Click here to read FEMA’s Entire Memorandum (.pdf).

Contact us today to find out how April 1, 2017 NFIP changes will affect your clients and to learn how we can help you find more favorable Private Market Flood Insurance alternatives for your clients.

Private Market Flood Insurance Win – Office Properties

A retail agent has an insured with a large portfolio of office properties. The insured was maintaining NFIP flood insurance policies on 21 buildings at 17 locations, because the buildings are located in a Special Flood Hazard Area (SFHA: zones beginning with the letter A). The NFIP flood insurance did not satisfy the insured’s needs due to having multiple policies, scattered renewal dates, actual cash value (ACV) building coverage and no business income coverage. The insured’s master property insurance policy includes flood coverage with an SFHA flood deductible of $250,000 per location per occurrence for building, contents and business interruption combined. The insured asked the retail agent to find a better solution in the private flood market and the retail agent asked us for help.

The Solution

We were able to leverage our strong relationships with private flood insurance markets to develop a custom solution for the client. The solution was one private market flood insurance policy to replace all 21 NFIP flood insurance policies at the 17 SFHA locations, which has a per location per occurrence limit that fits perfectly with the insured’s SFHA flood deductible. This private market flood policy will renew concurrent with the insured’s master property insurance policy, provide a per location per occurrence limit of $250,000 for building, contents and business interruption combined, provide replacement cost value (RCV) building coverage and business income coverage. This custom solution reduces the administrative burden of managing primary layer flood insurance, provides far better coverage and satisfies all of the needs of the insured.

The Benefits

  • 1 master policy instead of 21 NFIP policies;
  • 1 renewal date instead of 17 different NFIP renewal dates;
  • A per occurrence limit that was tailored to fit perfectly with the insured’s master property insurance program’s flood deductible;
  • Replacement cost value (RCV) building coverage instead of NFIP’s actual cash value (ACV) building coverage;
  • Includes business interruption coverage instead of NFIP excluding business interruption coverage;
  • Insured was able to choose a renewal date that is concurrent with the insured’s property insurance program renewal date;
  • The premium may renew flat or decrease instead of NFIP’s guaranteed increase every year;
  • Completely eliminates any potential for a coverage gap.

Click here to download this case study in .pdf.

Contact us today to take advantage of our flood insurance expertise and capabilities to offer winning flood insurance solutions to your clients.

Hurricane Matthew Is On It’s Way

Last night, the trajectory of Hurricane Matthew shifted to the west, according to the advisory of the National Hurricane Center. This means that according to the current models Hurricane Matthew is expected to skirt along the east coast of Florida and the Carolinas beginning this Thursday, potentially making a landfall in the outer banks of North Carolina this weekend.

This is a large and powerful hurricane about the size of Arizona. Even if Hurricane Matthew does not make direct landfall along the east coast of Florida or the Carolinas, the storm is wide enough that areas along the east coast of these states are expected to feel hurricane force winds as well as experience substantial amounts of rain and storm surge. Due to the size of Hurricane Matthew, areas in central Florida and on the west coast of Florida may also feel tropical storm or hurricane force winds and experience substantial rainfall. If the storm track shifts further to the west, and the storm makes landfall as a Category 3 hurricane, the effects would be much worse for the area in which it makes landfall.

Therefore, everyone along the east coast of Florida and the Carolinas should begin making appropriate preparations, while those in central and western Florida should be prepared for strong wind and rain. We will provide another update late afternoon today.

As always, we encourage you to stay alert and make all necessary preparations in an attempt to minimize the impact of possible flooding on your homes and businesses:
• Monitor your surroundings and NOAA weather alerts;
• Review your disaster response and recovery plan with your staff and/or family members;
• Make sure you have plenty of drinking water and food reserves;
• Ensure that important document files are backed up away from your property so they aren’t lost if electronics and paper files are destroyed by water;
• Take all necessary steps to prevent the release of dangerous chemicals that may be stored on the property;
• Contact your property insurance agent.

It only takes one storm to make it a bad year for your business. We have substantial expertise assessing, insuring, and mitigating flood risk. Stay alert and contact us to learn how we may be able to improve how you insure your client’s flood risk.

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