Flooding is the most common and costly natural disaster in the United States, causing billions in economic losses each year. In fact, according to the National Flood Insurance Program (NFIP), 90% of all natural disasters in the United States involve flooding. Recently, the Federal Emergency Management Agency (FEMA), which administers the NFIP, announced proposed rate changes to better align the program’s premiums with risk. NFIP provides coverage to more than 5 million households and small businesses across the United States.
The initiative, which FEMA calls Risk Rating 2.0, comes in the aftermath of several catastrophic events, including the Baton Rouge flood in 2016, Hurricanes Harvey and Irma in 2017 and Hurricane Florence last year. In each of those events, a large share of damaged properties lacked Flood insurance, in part because FEMA’s current system didn’t accurately measure their risk.
One big change will have the new rates be property-specific and based on factors like the distance a business is from the coast or other water source or its elevation and the cost to rebuild. Higher-risk properties will have higher rates. Under the current system, everyone in a high-risk zone pays the same rates, regardless of the level of actual risk.
The new rates will be published by April 1, 2020, and will go into effect October that same year.
Many public officials in flood-prone areas such as in Louisiana, Florida and Texas are concerned about how the increased costs will impact homeowners and small business owners and are waiting to review FEMA’s official plan. The changes are also likely to fuel the longstanding debate over Flood insurance, with policy makers divided over how much the public should subsidize the program.
Preparing for Flood Risks
In addition to securing Flood insurance, small businesses should be implementing measures to prepare for flood risks and mitigate their exposures. These measures include:
- Considering using flood-resistant materials for the building to reduce flood damage.
- Having a plan in place. Everyone should know what to do in the event of a flood and a good communication system should be in place well in advance. This includes designating one person to make phone calls or sending out mass texts or emails to alert employees of danger in advance.
- Backing up files. Important information should always be backed up on a remote server; the alternative is for a business to create two copies of everything and store the second set of files off-site. If data is lost that cannot be recovered, it can be detrimental to a business.
- Proactively protecting the building and assets if the weather indicates the possibility of a flood. All electronic equipment should be moved with computers shifted to a higher location. Sandbags should be used and a “dam” created around the perimeter of the building to help keep water from rushing inside.
- Using caution when cleaning up. Once the water has receded, it’s important for business owners to be vigilant and safe when cleaning up. This involves hiring a professional crew that has the tools and equipment needed to perform the cleanup and restore the business. Those cleaning up should be aware of active power and power lines, and wear protective clothing when entering a flooded area.
- Putting safety first: While flood damage is always traumatic, the safety of employees is paramount.
RPS Flood Services provides both Flood and Excess Flood insurance and handles Flood insurance placements for the underlying National Flood Insurance Program (NFIP) and RPS’ In-House Excess Flood facility. Eligible risks include high-valued dwellings, restaurants, public entities, condominiums/ townhouses, apartment complexes, office buildings, manufacturing facilities, townships, shopping centers, and schools/universities. Business Interruption coverage is available under the Excess insurance above a $100,000 separate deductible.
We also offer Flood insurance to small retailers. Rating/quoting/binding is made easy through our online platform. Our RPS e-Commerce platform is designed to wrap up the entire quote process in five minutes or less, improving efficiency for our broker partners by saving time and steps. Talk to your business insureds about the need for Flood insurance and visit the RPS eCommerce platform to provide them with quotes. For larger accounts, please contact RPS Flood Services.