Floods on the Rise
Flood losses had a severe impact on the property insurance industry in 2016. According to the National Centers for Environmental Information, the U.S. suffered four severe inland flood events in 2016, each resulting in losses over $1 billion. This number of billion-dollar loss events was two times more than any previous year, demonstrating the expanding frequency of severe flood events.
Organizations around the world are facing challenges with these evolving flood exposures. The traditional definition of “flood” is being stretched to include surface-water, storm-water and flash-flood exposures, exacerbating the already murky coverage line between flood and windstorm loss. Coastal areas continue to face extreme flood risks associated with tropical storms, while inland regions face increased exposure due to changing waterways and land development.
New Tools for Assessing Risk
The insurance industry, natural-hazards modeling companies and regulatory agencies are responding to the evolving flood risk with creative tools and services. The U.S. government, via the National Oceanic and Atmospheric Administration (NOAA), recently launched a new national water model. The model uses data from more than 8,000 U.S. geological survey gauges to generate hourly forecasts for the entire U.S. river network.
Statistical modeling organizations are developing similar analysis tools. RMS, a leader in the natural-hazards modeling field, has recently developed inland flood maps and modeling capabilities for 13 countries in Europe. Other organizations are developing similar advanced analytics based on satellite mapping and location-based information. These tools and services far exceed the traditional flood maps (e.g., U.S. FIRM maps) and will facilitate advanced evaluation and risk management decisions.
Managing Flood Risk Exposures
Consider the following when trying to manage your flood risk exposures:
- Make sure any identified flood risk is based on current flood maps and risk data. Hylant has access to multiple data sources that can help validate or refine the flood evaluation.
- Understand how the insurance markets view the flood risk for each specific property. Underwriters are beginning to utilize advanced analytics, which may not be transparent or available to you.
- Consider loan covenants as they relate to flood exposure. At a minimum, you will likely need a National Flood Insurance Program (NFIP) policy for any location that even touches a high-hazard flood zone.
- To avoid potential coverage gaps, place “All-Risk” and “Flood & Earthquake” insurance with the same insurer, if possible.
- Evaluate loss estimates associated with flood-exposed properties to ensure asset values and operational impacts have been accurately calculated.
- Make sure any flood-exposed location has implemented a formal emergency response plan to ensure an effective response in the event of a flood. Hylant can assist those needing help developing a plan.
For additional information on flood evaluation or for specific questions, please contact a member of Hylant’s Property & Marine risk practice team.