While most flood insurance claims come from what the National Flood Insurance Program calls Special Flood Hazard Areas, which have a high risk of flooding, more than 40 percent of claims in recent years have come from areas that have a moderate-to-low risk of flooding. Between 1996 and 2019, 99 percent of all U.S. counties experienced a flood event, according to the Federal Emergency Management Agency (FEMA).

Consequently, regardless of where your property is located, it’s important to ensure your organization has the right flood coverage in place. This article looks at flood projections and discusses how to assess whether your organization has sufficient coverage to provide protection if your property is damaged in a flood.

The flood landscape for 2022 and beyond

A recent report from the nonprofit First Street Foundation and global engineering firm Arup, “The 4th National Risk Assessment: Climbing Commercial Closures,” looked at the risk of flood damage to 3.6 million retail, office and multi-unit residential properties across the U.S. Key findings include:

• U.S. businesses could lose more than 3.1 million days of operation from flooding this year.
• They could spend about $13.5 billion in 2022 to repair or replace flood-damaged commercial buildings. That annual cost could grow by roughly 25 percent to exceed $16.9 billion by 2052, as illustrated.

FEMA’s new risk-rating methodology

In response to the increase in extreme weather events resulting higher instances of flooding, FEMA has introduced a new risk-rating methodology that’s based on industry best practices and uses cutting-edge technology. Risk Rating 2.0 uses more data to estimate a property’s flood risk and deliver rates that, per FEMA, are “actuarily sound, equitable, easier to understand and better reflect a property’s flood risk.”

This change means certain properties will see an increase in premiums while others may experience a decrease. More importantly, premiums will be based on a more accurate rating system than in the past.

Make sure you have adequate flood coverage

It’s a good idea to review your commercial insurance coverages to verify if you are adequately protected in the event of a flood.

Commercial insurance coverages do not always include flood protection. Even if they do, in geographic areas that have a high flood risk, it may be prudent to purchase a stand-alone flood policy. If you have a mortgage, the lender can require flood insurance depending on your flood zone.

Segal offers a complimentary policy review to assess the appropriateness of your current property and casualty coverage and flood coverage.

As part of our review we will:

• Determine your flood risk based on FEMA’s flood maps, which are divided into several zones.
• Examine types of coverage you have for your building(s) and their contents.
• Consider your claims data.
• Analyze your limit of liability and deductible to determine if your policy could benefit from improvements in the scope of coverage.

As a leading broker for plan sponsors for decades, we have the experience to give you insights into coverage gaps and options for closing them.