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Private Market Flood Insurance

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have not been properly maintained and/or follow flood control manuals that have not been updated for decades, and use outdated climatological data and runoff projections.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 Since so many dams, levees and floodwalls have not been properly maintained, or may be following outdated flood control manuals, you most likely have clients with substantial uninsured flood risk.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.

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.

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.

Are You Ready For 2016 Atlantic Hurricane Season?

Since June 1st marked the beginning of the Atlantic Hurricane Season that will run through November 30th, we look at the predictions and focus on how to improve how you insure your clients’ hurricane and flood risk.

This hurricane season has already gotten off to an unusual start. While weather experts predicted near-normal Atlantic hurricane season having less storms than average, Tropical Storm Colin has already set a new record for the earliest third named storm in the Atlantic basin only 6 days into June. According to the National Hurricane Center, getting to the “C” storm in the Atlantic name list in June is exceedingly rare and it is the earliest that a third named storm has ever formed in the Atlantic basin.

Colin made landfall in Florida on Monday night. Some parts of Florida picked up as much as 10 inches of rain, and much of the Tampa Bay area still had standing water as of this morning, according to the National Weather Service. The National Hurricane Center declared Colin as “post-tropical” as it moves away from land over the western Atlantic Ocean.

For those of your clients with buildings in areas susceptible to damage from wind and/or storm surge resulting from tropical storms and hurricanes, their named windstorm and flood coverages are extremely important components of their risk management and insurance program. Do not wait for a named windstorm event to bring to your attention deficiencies in the named windstorm or flood insurance coverage you have placed for your clients. Take advantage of our proprietary private market flood insurance program that applies to all flood zone classifications (A, B, C, D and X zones) and all asset classes of commercial real estate. It is designed exclusively for those who fit the following criteria:

  • Have multiple locations insured with NFIP flood insurance;
  • Have flood coverage in their master property insurance program;
  • Have a minimum of $25,000 in total NFIP premiums;
  • Want a more efficient way to buy primary layer flood insurance;
  • Want better primary layer coverage than NFIP flood insurance.

Agency Flood Resources has substantial expertise assessing and insuring hurricane and flood risk, so feel free to contact us with any questions you may have regarding our private market flood program or other private market flood insurance programs available in the rapidly developing private flood marketplace.

Three Key Elements of the New Flood Insurance Bill

The U.S. House of Representatives unanimously passed H.R. 2901, known formally as the Flood Insurance Market Parity and Modernization Act, by a vote of 419-0 last Thursday. This is a very positive development for insureds, insurance agents and insurance carriers, because it provides much needed clarity on three important issues that have been holding back the development of the private flood marketplace:

  1. Lender Acceptance: If it becomes law, lenders will have clear authority to accept private market flood insurance as an acceptable alternative to National Flood Insurance Program (NFIP) flood insurance.
  2. Pre-FIRM Rates and Grandfathering: If it becomes law, it would eliminate the loss of pre-FIRM and grandfathered rating options, allowing insureds to be considered by FEMA to have maintained continuous insurance coverage if they leave the NFIP to buy private market flood insurance and then go back to NFIP later on.
  3. Regulation of Private Flood Insurance: If it becomes law, state insurance regulators will determine the specifics of acceptable coverage for private flood insurance sold by admitted carriers within their respective states.

The bill was sponsored by Reps. Dennis Ross (R-FL) and Patrick Murphy (D-FL) and aimed to clarify some provisions within previous legislation passed in 2012. Congressman Murphy is our local representative in the U.S. Congress and for several months we have been in communication with he and his staff about the legislation.

If you have any questions about this legislation or if you want us to help you find private market alternatives to NFIP flood insurance for your clients, please contact us. We would be pleased to help you.

Post by Dan Freudenthal

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.

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Despite increased risk, sales of flood policies have plummeted almost 10% – here’s why

Agency Flood Resources was featured at the Insurance Business America’s publication where an award-winning news reporter Caitlin Bronson analysis the topic of flood insurance “Despite increased risk, sales of flood policies have plummeted almost 10% – here’s why “.

“We are seeing that as NFIP costs increase, people are picking up the phone, calling their agent and saying ‘What do you have as an alternative?’” said Freudenthal, who notes that the recent premium increases are the highest he’s seen in 15 years. “In the coming three years, a lot of interesting things well happen. The private flood market is about to burst.”

Read the full article here.

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