One year ago today, one of the costliest hurricanes since the year 1900 pummeled the United States east coast. The storm caused over 100 deaths and tens of billions of dollars in economic damage. It ranked as the nation’s second-worst storm for claims paid out by the National Flood Insurance Program (NFIP) and experts predicted that payouts could reach $7 billion. To date, insurers have approved $7.8 billion in flood program payments to policyholders. Just three months earlier, in July 2012, the United States Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012. The legislation changes the way the NFIP is run. As a result of the law, effective October 1, many homeowners and business owners with federal flood insurance who received subsidies will see their premiums rise faster than the surge of Superstorm Sandy. The New York Times reports “Some property owners, including business owners and those who bought property after July 6, 2012, are shocked to be facing potential tenfold premium increases…”
While those affected by Superstorm Sandy grapple with a slow recovery and difficult decisions, now, more than ever, every commercial and residential property owner must be proactive about flood risk to limit exposures, minimize losses and manage expenses.
Flood risk management is more than a program responsive to severe weather events. It is a continuing practice that examines whether or not a structure is adequately insured and whether or not coverage is commensurate with the actual risk. It is a practice that goes beyond a designation on the Federal Emergency Management Agency (FEMA) flood insurance rate map (FIRM) to assess how well a property’s individual characteristics such as construction, age, location and mitigation efforts will fare during catastrophic flood events and analyzes property-specific information, including deeds, plot maps, surveys, elevation certificates, flood zone determinations, flood-proofing certifications, flood claim history and property improvements. Flood risk management allows property owners to identify the true risk to adequately protect the property, capture savings and increase value.
So here’s the takeaway for all flood policyholders. Flood risk management enables you to implement a program of due diligence. Whether your insurance agent or broker is calculating appropriate risk retention levels, negotiating flood deductibles and coverage limits afforded by a property policy or trying to rate an NFIP or excess flood policy, it is critical to have the right flood zone classification and accurate documentation for the individual structure. Having a flood risk management program in place and getting the flood zone correct will help you protect your assets, obtain flood insurance at the lowest cost and more wisely budget your dollars because not all flood risk is equal.
If you own or manage commercial or residential property in a high-risk flood zone, obtain a free AFSI analysis of your risk and exposures.