Tag Archives:

Flood Insurance

Presenting at the MBA Insurance Conclave 2016

Agency Flood Resources was once again honored to present at the Mortgage Bankers Association’s (“MBA”) Insurance Conclave, which was held on September 20th in Chicago, IL. The audience included over 50 risk management professionals from commercial lending and loan servicing organizations as well as from life insurance companies and federal regulatory agencies who are responsible for property and casualty insurance compliance for portfolios of commercial and multifamily loan portfolios.

Dan Freudenthal, President at Agency Flood Resources, shared his insights on the topic of “Flood Insurance: let’s talk flood losses. The collateral floods… what happens next?”. In the session, panelists discussed case studies demonstrating how flood deductibles impact claim payments, how flood losses are really settled, how to manage the claim, and what to do if there is not enough coverage to cover the loss. The panelists also further discussed SFHA flood deductible language, possible gaps in coverage, managing between the NFIP and excess coverage, private market alternatives, information the borrower should know, obstacles to payment, lessons learned and how a servicer should be plugged in to influence the timing and amount of payment.

Mr. Freudenthal was presenting together with Alice Edwards, Managing Director – Forensics at PwC. The session was moderated by Laura Smith, SVP Loan Administration at Berkadia.

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.

Into the Peak of the Hurricane Season

Although the Atlantic hurricane season officially began on June 1st, the hurricane activity peaks from mid-August through mid-October – a period commonly referred to as a “season within the season”, according to the National Oceanic and Atmospheric Administration (NOAA). Weather experts view this time of the year as the most active and dangerous time for tropical cyclone activity, accounting for 78 percent of the tropical storm days, 87 percent of the category 1 and 2 hurricane days, and 96 percent of the major (category 3, 4 and 5) hurricane days.

Just two weeks ago a slow-moving area of low pressure and near-record amounts of atmospheric moisture led to extreme rainfall and historic flooding in southeast Louisiana.

Last night, Tropical Depression Nine, the area previously called Invest 99L, developed just south of Florida and moves near the Florida Keys, western Cuba and southern Florida, according to the National Hurricane Center. While it currently remains poorly organized, meteorologists predict that the system could become a tropical storm as it turns northward then northeastward over the Gulf of Mexico this week, and could cause heavy rain and localized flash flooding.

Despite the level of weather activity as we move into the peak of the hurricane season, we encourage you to stay alert and make all necessary preparations in an attempt to minimize the impact of possible flooding on your business:
• Monitor your surroundings and NOAA weather alerts;
• Review your disaster response and recovery plan with your staff and/or family members;
• 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. Our flood team has substantial expertise assessing, insuring, and mitigating flood risk. Contact us to learn how we may be able to improve how you insure your client’s flood risk.

Private Market Flood Program Delivers a Winning Solution to a National Outlet Store Company

Our client, a national outlet store owner and operator, was looking for a private market flood insurance solution that would satisfy their needs for primary layer flood coverage better than NFIP flood insurance. Our client has outlet stores in 28 buildings at 19 locations that are in FEMA-designated Special Flood Hazard Areas (SFHA: flood zones beginning with letters A and V). NFIP flood insurance did not satisfy their needs due to having multiple policies, scattered renewal dates, limits that would not adequately cover their merchandise and improvements and betterments, and the 10% annual cost increase that is expected for many years to come.

We used our exclusive private market flood insurance program to deliver a solution that was customized to their specific needs. Our winning solution simplifies the administration of primary layer flood insurance, reduces their flood insurance costs, delivers limits and coverage terms that perfectly match their needs to eliminate gaps in coverage.

Download this case study (.pdf) to view the comparison of the benefits of our program compared to NFIP flood insurance.


Do you have commercial lines clients who fit this criteria? If so, call us today to take advantage of our private market flood program to offer winning flood insurance solutions to your clients.

Contact Us

Flood warning: Major coastal flooding is expected along Jersey Shore this weekend

As a powerful winter storm aims at the Northeast this weekend, forecasters predict severe coastal flooding is likely to be among the worst on record along the Jersey Shore. According to the Coastal Flood Watch Warning issued by the National Weather Service (NWS) earlier this morning, “the storm system is expected to bring strong onshore winds to the coasts of Delaware and New Jersey from Friday night into Saturday night, and the coastal flooding could last for three consecutive high tide cycles with water remaining trapped along the coast, and in the back bays and estuaries.”

Wave heights of as much as 20 feet are expected on the near-shore waters off New Jersey and Delaware over the weekend, ranking among the highest on record. That, combined with a full moon high tide and northeast winds that may gust to as much as 60 mph driving water onshore, could result in major flooding, causing significant property damage and beach erosion. A storm surge of as much as 5 feet on top of the high tide is expected as well.

In addition to those located on the shore and the eastern side of the bay, Agency Flood Resources encourages all those located along the western edges of the bays to stay alert as well, and make all possible preparations in an attempt to minimize the impact of flooding on their homes and business:

  • Take all necessary steps to prevent the release of dangerous chemicals that may be stored on the property; locate gas mains and electrical shut-offs and anchor fuel tanks.
  • 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.
  • Review your disaster response and recovery plan with your staff and/or family members.
  • Contact your property insurance agent.

Agency Flood Resources has substantial expertise assessing, insuring and mitigating flood risk, therefore please feel free to contact us with any questions you may have and to learn how we may be able to improve how you insure your client’s flood risk.

April 1, 2016 NFIP Program Changes Bring Premium Increases, a New Rating Methodology and Transparency in Communications

While at first glance, April 1, 2016 NFIP changes appear to be minor, they are significant enough for you to take note of them. Upcoming changes bring premium and fee increases, a new rating methodology for both Preferred Risk Policies (PRPs) and Property Newly Mapped Into the SFHA Policies, as well as new communication procedures.

Increase to Premiums and Fees

Beginning April 1, 2016, the total average premium increase for all NFIP policies will be 9%. The actual increase for any individual policy may be higher, based on a number of underwriting criteria. Also, the premium increase percentages do not include the Federal Policy Fee or the new $250 Congressionally-mandated HIFAA surcharge, which are not considered premium and are not subject to the premium rate cap limitations. Premium rate increases for some classes of policies are as follows:

  • 25% – Pre-FIRM – All A and V zones – Non-Residential Business Properties, Non-Primary Residences, Severe Repetitive Loss Properties and Substantially Improved Properties.
  • 13% – Post-FIRM – Unnumbered A zones – All occupancy types.
  • 10% – Post-FIRM – All V zones – All occupancy types.
  • 9% – Post-FIRM – A1-A30, AE zones – All occupancy types.

The Reserve Fund Assessment (RFA) will be increasing for the Preferred Risk Policies (PRP) and the Federal Policy Fee (FPF) will be increasing for all policy types.

Revised Rating Methodology For Preferred Risk Policies (PRP) and Property Newly Mapped Into the SFHA Policies

Prior to the Homeowners Flood Insurance Affordability Act (HFIAA), PRP were written on properties located outside of the SFHA and on properties newly mapped into the SFHA. On April 1, 2015, in accordance with HFIAA, all NFIP carriers were required to use a new class of NFIP policies, called Property Newly Mapped Into the SFHA, for all new and renewal policies on properties that were newly mapped into the SFHA.

On April 1, 2016, all NFIP carriers will use a new rating methodology for both of these classes of NFIP policies. The new methodology will utilize base premium rates and a multiplier to calculate premium for each renewal on or after April 1, 2017. While base premium rates on PRP will increase each year, the multiplier will remain 1.0 for subsequent renewals. Base premium rates for Property Newly Mapped Into the SFHA policies will increase each year, plus the multiplier will increase beginning April 1, 2017, based on the year in which the property was newly mapped into the SFHA. This enables NFIP to increase rates for policies for Property Newly Mapped Into the SFHA more than PRPs.

The declarations pages for these two classes of policies will also display more premium information.

Elimination of Subsidy for Certain Pre-FIRM Policies That Lapse and Are Reinstated

Effective April 1, 2016, FEMA will prohibit the use of Pre-FIRM subsidized rates for policies reinstating coverage for Pre-FIRM buildings that were previously insured by the NFIP where the NFIP coverage is reinstated by means of a payment received more than 90 days after expiration or cancellation of the policy.

Initial Implementation of Clear Communications

HFIAA requires that FEMA clearly communicate to the policyholder their full flood risk, regardless of whether their premium rates are full-risk rates. NFIP insurers will have to report current flood zone and current FIRM information including BFE, if applicable, for all new business policies effective on or after April 1, 2016, and for all renewals effective on or after October 1, 2016.

Time to Look for Private Market Alternatives to the NFIP

The Biggert-Waters Act of 2012 calls for private insurers to enter the flood marketplace to provide alternatives to NFIP insurance. Rapidly increasing NFIP rates encourage insurance agents to look for flood insurance alternatives in the private market.

Download FEMA’s Bulletin on the NFIP Program Changes Effective April 1, 2016 (.pdf)


Contact Us

Premium Reduction Service Helps Insurance Agency Win a New All-Lines Property and Casualty Account

Our client, a leading regional insurance agency, was trying to win a new all lines property and casualty account by taking it over with a mid-term broker of record (BOR) letter. Their prospect was a large condominium association, where the NFIP flood insurance premium on the 48 buildings was approximately $160,000. This was 45% of the condominium association’s total insurance budget of $350,000. While the agent had demonstrated to the association that he could reduce their total insurance budget by about 10% by saving money on a few lines of coverage, the association did not think 10% was enough to fire the incumbent broker.

The Solution

We used our research-driven underwriting process to procure data that enabled us to re-rate the flood policies using an alternative rate structure available through the NFIP. As a result, we were able to reduce the annual NFIP premium by approximately $55,000 (34%) and reduce total insurance expenses by an additional 15%. Combined with the agent’s other ideas for reducing insurance costs, our Premium Reduction Service helped the agent get the BOR letter and win the new account, by helping the agent deliver total insurance savings of 25%.

The Results

  • Reduced annual NFIP flood premiums by $55,000 (34%).
  • Reduced total insurance expenses by an additional 15%.
  • Helped the agent to get the BOR letter and win a new account.

Download this Case Study (.pdf)


Contact us today to learn how we can help you win new business!

Contact Us

Development Consulting Saves More than $1M of Property Value for a Mixed-Use Development Project

A regional real estate developer was unable to close on a construction loan for a mixed use development project located within a FEMA-designated Special Flood Hazard Area (SFHA) in California. At the last minute, the lender identified that the building is within a SFHA and required the developer to factor into his financial projections the purchase NFIP flood insurance during construction. The capitalized value of the NFIP premium was going to prevent the developer from obtaining the loan and moving forward with the project. Our client, a super-regional insurance agency, asked us to review the building plans to figure out whether or not any changes could be made that would make the building eligible to be reclassified out of the SFHA to eliminate the need for NFIP flood insurance during and after construction, so their client would be able to secure the construction loan and move forward with the development project.

THE SOLUTION

Our highly specialized flood consulting team, comprised of water resource engineers, surveyors and certified floodplain managers, worked in conjunction with the developer and its local design team to assess the situation and develop a solution. Our team provided development consulting recommendations for altering the plans to create a building that would be considered more “flood safe” according to FEMA’s rules and regulations. The result is a building that will qualify for removal from the SFHA upon completion of construction while remaining within the development budget. Our engineers obtained a Conditional Letter Of Map Revision (CLOMR) from FEMA indicating that the building will be eligible for removal from the SFHA upon completion of construction; provided, the develop builds it according to the plans.

THE RESULTS

Our team was able to get the lender to recognize the CLOMR and eliminate the NFIP flood insurance requirement during construction. The outcome was no change to the original development budget, which allowed the developer to obtain the construction loan and move forward with the project. Our industry leading flood expertise helped the developer:

  • Design a building with far less flood risk.
  • Eliminate the lender’s flood insurance requirement.
  • Prevent the developer from spending more than $50,000 on NFIP flood insurance premiums.
  • Save more than $1 million of property value by preventing the NFIP flood insurance expense.

Download this Case Study in .pdf.

 

NFIP November 1, 2015 Program Changes Will Affect Business Structures

The Biggert Waters Act of 2012 (BW-12) requires FEMA to phase out Pre-FIRM (“subsidized”) rates on Non-Residential buildings used for business purposes. Starting November 1, 2015, the following changes will take effect, which will substantially increase insurance premiums on Non-Residential buildings used for business purposes.

Starting November 1, 2015, the current Non-Residential building category will be divided into two categories:

  • Non-Residential Business
  • Other Non-Residential

This requirement to identify business properties within the larger Non-Residential occupancy category will begin for all Non-Residential policies as they renew after November 1, 2015. Policyholders will be required to complete the Non-Residential Building Use Questionnaire for each such policy as it renews.

For rating purposes, the “Non-Residential Business” refers to a building where a licensed commercial enterprise is carried out to generate income and coverage is for one of the following:

  • (a) a building designed as a non-habitational building;
  • (b) a mixed-use building in which the total floor area devoted to commercial uses exceeds 25% of the total floor area within the building; or
  • (c) a building designed for use as office or retail space, wholesale space, hospitality space, or for similar uses.

Properties that have been used as houses of worship, other non-profit entities, community recreation buildings and garages will be categorized as “Other Non-Residential”.

The premium increases for Pre-FIRM (“subsidized”) Non-Residential Business properties will be 25% per year as stated in the BW-12 legislation. These increases on Pre-FIRM business policies will be applied with the next set of NFIP Program changes in 2016. Other Non-Residential properties will not be affected by this rate increase as Section 5 of the Homeowners Flood Insurance Affordability Act (HFIAA) limits premium increases to no more than 18% per year on Other Non-Residential properties.

The NFIP refund rules will be changed to allow for prior-term refunds for certain cancellations and policy changes (endorsements). In such cases, refunds will be restricted to 5 years instead of 6; this is to match the Federal requirement to retain policy records for 5 years. In addition, for certain other types of policy cancellations, the NFIP will limit the premium refunds to the current policy term only.


Read full Summary of the revised cancellation refund procedures.
Read full NFIP Bulletin W-15016.

Page 2 of 212

Get in Touch

Toll Free: (844) 359-7468
Phone: (561) 253-9020

Email Us