Flood Risk Report Released

The Insurance Information Institute (III) recently released  a new report entitled Flood: Beyond Risk Transfer. It predicts that major flood events will grow over the next 30 years, even though insurance and policymakers improve their abilities to reduce flood risks.

“Our understanding of loss trends and expertise in assessing and quantifying risk must be joined at the hip to technology, public policy and finance, and science,” stated Sean Kevelighan, CEO, III said in a recent press release. “We need to partner with communities and businesses at every level to promote a broad resilience mindset focused on pre-emptive mitigation and rapid recovery.”

The report highlights how the increased frequency and severity of U.S. floods will have dire consequences for property values, insurance rates, and mortgage-backed securities, as well as the fact report that despite government efforts, the existing approach to flood risk is insufficient.

Currently, FEMA’s National Flood Insurance Program (NFIP), which is the largest writer of flood insurance in the U.S. is roughly $20.5 billion in debt to the U.S. Treasury. Congress has set the NFIP’s debt limit at $30.4 billion.

The report, also examines flood loss trends as well as factors that drive these loses. It also points out how new data and analytical tools are being used to help communities and policymakers make decisions regarding flood risks. It also looks at how insurers and reinsurers are expanding flood insurance coverage.

“Whether it’s building codes or pre-emptive risk mitigation, it costs money,” said Dr. Michel Léonard, CBE, Vice President and Senior Economist, Triple-I, in the report. “The better the data at your disposal, the more accurately you can justify the expense.”

Flood insurance has been shunned by private insurance companies for decades which led to the creation of the NFIP in 1968 by the federal government. However, as technology has improved data analytics and sophisticated catastrophe modeling, private insurers are starting to move into the flood insurance market. This should help improve the availability and affordability of this coverage, according to the report.

While new insurance products from the private market will help, it is only part of the solution to manage the damaging impacts of flooding. 

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The report also notes that reinsurers are allowing insurers to sell policies that let property owners bundle a flood policy with their homeowners insurance via an endorsement on their policy. As more private insurers enter the flood insurance market, it increases competition and spreads the economic risk of flooding.

Private flood insurance policies tend to offer higher coverage limits, NFIP policies are currently capped at $250,000 for residential buildings and $500,000 for nonresidential buildings. The report concludes that the insurance industry can help reduce flooding risks by working with local governments to make improvements in zoning, land use, and building codes, because better data is essential for improved decision-making and discovering new opportunities to mitigate flood risk.

At HomeInsuranceKing.com, we offer a competitive review on flood insurance rate quotes starting as low as $400 for the year. We compare rates against the best providers, reviewing coverage and deductible options that best fit your needs. Call today at 888-620-1954!