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Flood Maps: Potential Hidden Property Risk

Apr 23, 2020 Decorative image

Jack was a very thorough businessman. Before purchasing his newest property, he performed his due diligence—including reviewing the county’s flood maps for himself. Knowing that his business would be at low risk of flooding gave him peace of mind.

Unfortunately, the flood maps—the tools used by insurers, builders and property owners to gauge and mitigate risk—hadn’t been updated for decades. You can probably guess what happened in the spring.

Trends Indicate More Property at Risk

Last year was the fifth consecutive year that the U.S. was impacted by 10 or more billion-dollar weather- or climate-related disasters, according to NOAA’s Climate.gov website. In 2019, these events included three major inland floods and two tropical cyclones.

As storms get stronger and water levels continue to rise, the fact that many flood maps are outdated leads to decisions that can have severe consequences. Many people on the East Coast who weren’t at major risk of flooding according to old flood maps, found out differently when Superstorm Sandy came ashore in 2012. In most cases, the peril of “storm surge” was included in the definition of “flood.”

Areas that might have flooded every 100 years a few decades ago are now at risk of flooding much more frequently. In recent years, the highest volume of flood-related claims have come from places that formerly were considered low-risk areas.

New Tools for Assessing Risk

As part of its function, the Federal Emergency Management Agency (FEMA) is challenged to constantly update flood maps to support the National Flood Insurance Program (NFIP). This nonprofit program, aimed at providing flood insurance to those who need it, is not able to support itself at this time and is reliant on government funding. Congress most recently reauthorized the NFIP to run through September 30, 2020.

However, the insurance industry, natural-hazards modeling companies and regulatory agencies are responding to the evolving flood risk with creative tools and services. For example, the U.S. government, via the National Oceanic and Atmospheric Administration (NOAA), launched a 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, developed inland flood maps and modeling capabilities for the U.S. in late 2018. Other organizations are developing similar advanced analytics based on satellite mapping and location-based information. These tools and services far exceed the information provided by traditional flood insurance rate maps (FIRMs) and will facilitate advanced evaluation and risk management decisions.

As information becomes more accurate and up-to-date, true exposures to flooding will become clearer. With that better understanding, it’s highly likely that flood insurance rates will rise, and impacts may be felt in terms of where structures can and cannot be built in the future.

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.
  • Review flood zone determination studies yearly. Are you in the same exposure zone this year that you were last year?
  • Understand how the insurance markets view the flood risk for each specific property. Underwriters use 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 flood insurance policy for any location that even touches a high-hazard flood zone.
  • To avoid potential coverage gaps, place “all-risk” and “flood and 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, contact your local Hylant property and marine risk management expert.

The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.

Author Tim Walsh, Risk Advisor, Property & Marine, Hylant