Category Archives: Flood Insurance

Coastal Property, Disaster Preparedness, Disaster Resilience, Flood Insurance

Coastal New Jersey Town Regains Class 3 NFIP Rating

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Sea Isle City, N.J., has regained its Class 3 rating under FEMA’s National Flood Insurance Program (NFIP) Community Rating System (CRS) after a brief demotion last year. Being rated Class 3 enables the coastal town’s property owners to receive a 35 percent discount on their federal flood insurance.

CRS is a voluntary incentive-based program designed to encourage strong floodplain management. Class 1 is the highest rating, enabling residents to obtain a 45 percent reduction in their premiums. Class 10 indicates that a community doesn’t participate in CRS. To date, only two of the 1,500 participating communities nationwide have achieved the highest rating: Tulsa, Okla., and Roseville, Calif.

High ratings are not easy to obtain or maintain. Sea Isle City first reached Class 3 in 2018, and the rating was briefly lowered to Class 4 last year after points awarded to communities after Superstorm Sandy expired. The city quickly regained Class 3 status through additional flood-management activities.

In the mid-1990s, conditions were so bad for Sea Isle City that it was nearly ejected from the NFIP. If this had happened, property owners wouldn’t have had access to federal flood insurance. Neil Byrne, the city’s floodplain manager, construction official, building sub-code official, and zoning officer, attributes the improvement to strengthened zoning ordinances that require structures to be elevated higher than FEMA recommends, as well as investment in berms and bulkheads.

“The history of Sea Isle City going from facing expulsion from the NFIP to now leading the charge in the CRS in New Jersey is truly inspirational,” said Thomas Song, FEMA resiliency specialist.  “What does not get enough attention is that success in the CRS program has to start with a strong understanding of the day-to-day compliance with NFIP requirements. It is extremely difficult to advance in CRS status without a strong foundation in floodplain-management practices.”

Achieving higher CRS rankings has become something of a friendly competition among coastal New Jersey towns, and only one other New Jersey community – Avalon – has a Class 3.

“Both Sea Isle City and Avalon have demonstrated their commitment in planning for future flooding, implementing higher building standards, and engaging in extensive public outreach,” Song said. “These efforts create an environment geared towards reducing flood damage and enhancing the safety and well-being of residents.”

As NFIP – through its Risk Rating 2.0 reforms – attempts to better align premium rates with risk, CRS discounts become even more significant to owners in flood-prone communities.

Last year, 17 Florida jurisdictions achieved Class 3 ratings. In Cutler Bay – a town on Miami’s southern flank with about 45,000 residents – the average premium dropped by $338. Citywide, that represented a savings of $2.3 million. In January 2024, Miami-Dade County became the latest municipality in the flood- and hurricane-prone state to achieve Class 3, leapfrogging from Class 5 due to the county’s flood-mitigation investments.

Meanwhile, back in New Jersey, Byrne says Sea Isle City hopes to become the state’s first Class 2 community.

“It’s very hard to get to the next level,” he said, but adds that flood pumps could help the city over the hump.

“Ninety-nine percent of our flooding is tidal flooding,” Byrne said, referring to inundation that happens during high tide events. “A lot of it goes away on its own, but we have little areas that need help getting the water out.”

About 90 percent of all U.S. natural disasters involve flooding. For decades, NFIP was practically the only available option for homeowners to obtain flood coverage. Before Risk Rating 2.0, however, coverage for higher-risk properties was often unfairly subsidized by lower-risk property owners.

In recent years, improved data, analysis, and modeling have helped drive increased private-sector interest in flood risk. This, combined with the NFIP reforms, should foster a more competitive flood insurance market in which coverage is both more available and more fairly priced.

“Collective responsibility and multi-disciplinary collaboration are necessary to build resilience around climate-related perils like flood,” said Triple-I CEO Sean Kevelighan. “FEMA’s CRS program is just one example of how communities can make themselves safer and save money through targeted investments that reduce the likelihood and size of catastrophic losses.”

 Learn More:

Triple-I “State of the Risk” Issues Brief: Flood

FEMA Reauthorization Session Highlights Importance of Risk Transfer and Reduction

Miami-Dade, Fla., Sees Flood-Insurance Rate Cuts, Thanks to Resilience Investment

FEMA Incentive Program Helps Communities Reduce Flood Insurance Rates for Their Citizens

Proposed Flood Zone Expansion Would Increase Need for Private Insurance

Catastrophes, Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance, Legal Environment, Regulation, Risk Management

Evolving Risks Demand Integrated Approaches

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Even as the Smokehouse Creek Fire – the largest wildfire ever to burn across Texas – was declared “nearly contained” this week, the Texas A&M Service warned that conditions are such that the remaining blazes could spread and even more might break out.

“Today, the fire environment will support the potential for multiple, high impact, large wildfires that are highly resistant to control” in the Texas Panhandle, the service said.

This year’s historic Texas fires – like the state’s 2021 anomalous winter storms, California’s recent flooding after years of drought, and a surge in insured losses due to severe convective storms across the United States – underscore the variability of climate-related perils and the need for insurers to be able to adapt their underwriting and pricing to reflect this dynamic environment. It also highlights the importance of using advanced data capabilities to help risk managers better understand the sources and behaviors of these events in order to predict and prevent losses.

For example, Whisker Labs – a company whose advanced sensor network helps monitor home fire perils, as well as tracking faults in the U.S. power grid – recorded about 50 such faults in Texas ahead of the Smokehouse Creek fires.

Bob Marshall, Whisker Labs founder and chief executive, told the Wall Street Journal that evidence suggests Xcel Energy’s equipment was not durable enough to withstand the kind of extreme weather the nation and world increasingly face. Xcel – a major utility with operations in Texas and other states — has acknowledged that its power lines and equipment “appear to have been involved in an ignition of the Smokehouse Creek fire.”

“We know from many recent wildfires that the consequences of poor grid resilience can be catastrophic,” said Marshall, noting that his company’s sensor network recorded similar malfunctions in Maui before last year’s deadly blaze that ripped across the town of Lahaina.

Role of government

Government has a critical role to play in addressing the risk crisis. Modernizing building and land-use codes; revising statutes that facilitate fraud and legal system abuse that drive up claim costs; investing in infrastructure to reduce costly damage related to storms – these and other avenues exist for state and federal government to aid disaster mitigation and resilience.

Too often, however, the public discussion frames the current situation as an “insurance crisis” – confusing cause with effect. Legislators, spurred by calls from their constituents for lower premiums, often propose measures that would tend to worsen the problem because they fail to reflect the importance of accurately valuing risk when pricing coverage.

The federal “reinsurance” proposal put forth in January by U.S. Rep. Adam Schiff of California is a case in point. If enacted, it would dismantle the National Flood Insurance Program (NFIP) and create a “catastrophic property loss reinsurance program” that, among other things, would set coverage thresholds and dictate rating factors based on input from a board in which the insurance industry is only nominally represented.

U.S. Rep. Maxine Waters (also of California) has proposed a Wildfire Insurance Coverage Study Act to research issues around insurance availability and affordability in wildfire-prone communities. During  House Financial Services Committee deliberations, Waters compared current challenges in these communities to conditions related to flood risk that led to the establishment of NFIP in 1968. She said there is a precedent for the federal government to step in when there is a “private market failure.”

However, flood risk in 1968 and wildfire risk in 2024 could not be more different. Before FEMA established the NFIP, private insurers were generally unwilling to underwrite flood risk because the peril was considered too unpredictable. The rise of sophisticated computer modeling has since given private insurers much greater confidence covering flood (see chart).

In California, some insurers have begun rethinking their appetite for writing homeowners insurance – not because wildfire losses make properties in the state uninsurable but because policy and regulatory decisions made over 30 years ago have made it hard to write the coverage profitably. Specifically, Proposition 103 and its regulatory implementation have blocked the use of modeling to inform underwriting and pricing and restricted insurers’ ability to incorporate reinsurance costs into their premium pricing.

California’s Insurance Commissioner Ricardo Lara last year announced a Sustainable Insurance Strategy for the state that includes allowing insurers to use forward-looking risk models that prioritize wildfire safety and mitigation and include reinsurance costs into their pricing. It is reasonable to expect that Lara’s modernization plan will lead to insurers increasing their business in the state.

It’s understandable that California legislators are eager to act on climate risk, given their long history with drought, fire, landslides and more recent experience with flooding due to “atmospheric rivers.” But it’s important that any such measures be well thought out and not exacerbate existing problems.

Partners in resilience

Insurers have been addressing climate-related risks for decades, using advanced data and analytical tools to inform underwriting and pricing to ensure sufficient funds exist to pay claims. They also have a natural stake in predicting and preventing losses, rather than just continuing to assess and pay for mounting claims.

As such, they are ideal partners for businesses, communities, governments, and nonprofits – anyone with a stake in climate risk and resilience. Triple-I is engaged in numerous projects aimed at uniting diverse parties in this effort. If you represent an organization that is working to address the risk crisis and your efforts would benefit from involvement with the insurance industry, we’d love to hear from you. Please contact us with a brief description of your work and how the insurance industry might help.

Learn More:

Triple-I “State of the Risk” Issues Brief: Wildfire

Triple-I “State of the Risk” Issues Brief: Flood

Triple-I “Trends and Insights” Issues Brief: California’s Risk Crisis

Triple-I “Trends and Insights” Issues Brief: Risk-Based Pricing of Insurance

Stemming a Rising Tide: How Insurers Can Close the Flood Protection Gap

Tamping Down Wildfire Threats

Catastrophes, Disaster Resilience, Flood Insurance, Insurers and the Economy

FEMA Reauthorization Session Highlights Importance of Risk Transfer and Reduction

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If there was a recurring theme in last week’s Senate Banking Committee hearing on reauthorization of FEMA’s National Flood Insurance Program (NFIP), it was the need for:

  • Congress to reauthorize NFIP, and
  • Communities, businesses, and government at all levels to invest in mitigating flood risk and in improving resilience.

It’s important to amplify this message, especially in light of a recent proposal by Rep. Adam Schiff that would, among other things, disband NFIP and require property/casualty insurers to provide “all-risk policies” based on coverage thresholds and rating factors dictated by a board in which the insurance industry is only nominally represented. Last year’s budget uncertainty – in which a potential government shutdown was threatened – left open the very real possibility of funding for NFIP expiring if Congress failed to reach a deal.

“Federal policies and programs, including NFIP, are essential,” said Daniel Kaniewski, managing director, public sector, for Marsh McLennan in his testimony. “But all disasters are local, and so too are resilience investment decisions.”

Before joining Marsh McLennan, Kaniewski was the second-ranking official at FEMA, where he was the agency’s first deputy administrator for resilience.

“To increase the resilience of communities against the pervasive risk of flooding,” Kaniewski testified, “we believe that risk transfer— including from the NFIP, private flood insurance, reinsurance, and parametric insurance — should be paired with risk reduction.”

In this regard, Kaniewski emphasized NFIP’s Community Rating System (CRS), which encourages and rewards community floodplain management practices that exceed the NFIP’s minimum requirements. He cited Tulsa, Okla., as one of two U.S. communities to have achieved the highest CRS rating (the other is Roseville, Calif.), making residents eligible for the program’s greatest flood insurance discount of 45 percent.

Even without achieving the maximum rating, citizens save on flood insurance when their communities invest in resilience. For example, Miami-Dade County, Fla., recently became the latest jurisdiction in the hurricane- and flood-prone state to benefit from CRS program. The county’s new Class 3 rating will result in an estimated $12 million savings annually by giving qualifying residents and business owners in unincorporated parts of the county a 35 percent discount on flood insurance premiums.  

Last year, 17 other Florida jurisdictions achieved Class 3 ratings. In Cutler Bay – a town on Miami’s southern flank with about 45,000 residents – the average premium dropped by $338. Citywide, that represented a savings of $2.3 million.

Unfortunately, only 1,500 communities nationwide participate in CRS, underscoring the importance of awareness-building, education, and collaboration.

Kaniewski also highlighted the opportunity presented by community-based catastrophe insurance (CBCI), which uses parametric insurance to provide coverage to local government entities that wish to cover a group of properties. Such programs enhance financial resilience by simultaneously providing affordable coverage and creating incentives for risk reduction.

“Our recent CBCI pilot in New York City was developed in partnership with the City of New York and several nonprofit and insurance industry partners and funded by the National Science Foundation,” Kaniewski said. “It provides a level of financial protection for low-to-moderate-income households that previously lacked flood insurance.”

Kaniewski called on other industries – such as finance and real estate – to encourage flood resilience investments, along with the insurance industry and all levels of government. He cited the recent roadmap for resilience incentives issued by the National Institute of Building Sciences (NIBS) – funded by Fannie Mae and co-authored by representatives of a cross-section of “co-beneficiary industries” – that focused on residential structures prone to flooding. Triple-I subject-matter experts were co-authors on the NIBS project.

Sen. Tim Scott of South Carolina, committee co-chair – along with Sen. Sherrod Brown of Ohio – spoke from the perspective of a former insurance professional who has sold flood insurance about his state’s recent investment in mitigation.

“In 2023, the state’s budget included significant funding for mitigation efforts that would reduce flood damage from future storms,” Scott said.“Backing up that investment, the South Carolina Office of Resilience released a nationally praised Statewide Risk Reduction Plan, identifying the communities most vulnerable to floods and targeting mitigation resources to protect those residents. These are local solutions to local challenges – and they will make a huge difference in the lives of South Carolinians.”

While solutions that work in South Carolina might not work in other states, Scott said, “I’m confident that similar, locally based solutions and approaches could make a huge difference.”

Sen. Katie Britt of Alabama invited Kaniewski to elaborate on her state’s Strengthen Alabama Homes program, which provides grants and insurance discounts to homeowners who make qualifying retrofits to their houses. Britt cited research that found the program had “directly resulted in lower insurance premiums and higher home resale values.”

Kaniewski spoke in detail about Alabama’s efforts, including Strengthen Alabama Homes – which, he pointed out, is now being emulated by other states, including hurricane- and flood-prone Louisiana. He also cited by name the author of the research Britt referenced – Dr. Lars Powell, executive director of the Alabama Center for Insurance Information and Research at the University of Alabama and a Triple-I Non-resident Scholar – for producing “the first study that I’ve seen that gives empirical data — real evidence that mitigation pays.”

Steve Patterson, mayor of Athens, Ohio, described a range of nature-based solutions his city has taken – from rerouting the Hocking River, which runs through the middle of the city, to removing invasive plants and restoring native trees along the bank.

“That’s been very effective in reducing flooding in different neighborhoods throughout the city,” Patterson said. “There are a lot of things cities and villages can do.”

The work done by Athens – like green infrastructure work by the Milwaukee Metropolitan Sewerage District in Wisconsin and municipal entities – offers opportunities to reduce flood risk while improving quality of life for citizens. But, as Patterson points out, not all municipalities have the financial capacity to engage in such projects.

That is where the engagement of co-beneficiaries of resilience investment as partners becomes so crucial.

Learn More:

Triple-I Issues Brief: Flood

Miami-Dade, Fla., Sees Flood Insurance Rate Cuts, Thanks to Resilience Investment

Milwaukee District Eyes Expanding Nature-Based Flood-Mitigation Plan

Attacking the Risk Crisis: Roadmap to Investment in Flood Resilience

Proposed Flood Zone Expansion Would Increase Need for Private Insurance

FEMA Incentive Program Helps Communities Reduce Flood Insurance Rates for Their Citizens

FEMA Names Disaster Resilience Zones, Targeting At-Risk Communities for Investment

Shutdown Threat Looms Over U.S. Flood Insurance

Flood Insurance, Floods

Miami-Dade, Fla., Sees Flood-Insurance
Rate Cuts, Thanks to Resilience Investment

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Miami-Dade County, Fla., has become the latest jurisdiction in the hurricane- and flood-prone state to benefit from participation in FEMA’s Community Rating System (CRS) – an incentive program that recognizes and encourages  floodplain management practices that exceed the minimum requirements of FEMA’s National Flood Insurance Program (NFIP).

The county’s new Class 3 rating will result in an estimated $12 million savings annually by giving qualifying residents and business owners in unincorporated parts of the county a 35 percent discount on flood insurance premiums.  

“This is a huge step forward in resilience for our county,” Miami-Dade County Mayor Daniella Levine Cava said after FEMA announced that Miami Dade had leaped ahead two rankings in the flood-risk rating. “It indicates that we have been able to demonstrate that we can create more resilience, more protection for our community.”

Miami-Dade County has invested $1 billion in stormwater infrastructure over the past 33 years since the inception of the county’s stormwater utility. Under Mayor Levine Cava’s administration, the county has planned to invest an additional $1 billion in stormwater infrastructure. In the past two years, the county has accelerated projects to upgrade Miami-Dade’s infrastructure and implement critical flood mitigation activities. 

Last year, 17 Florida jurisdictions achieved Class 3 ratings. In Cutler Bay – a town on Miami’s southern flank with about 45,000 residents – the average premium dropped by $338. Citywide, that represented a savings of $2.3 million.

Over 1,500 communities nationwide participate in the CRS program, but only Tulsa, Okla., and Roseville, Calif., have taken sufficient steps to achieve Class 1 status and have their citizens receive the greatest premium discount of 45 percent. Both of these communities previously experienced disastrous flooding. Tulsa spent decades developing and implementing stormwater management improvements before receiving its Class 1 designation in 2022.

About 90 percent of all U.S. natural disasters involve flooding. Whether related to coastal and inland inundation due to hurricanes, extreme rainfall, snowmelt, mudflows, or other events, floods cause billions of dollars in losses each year.

As reported in a recent Triple-I “State of the Risk” Issues Brief, flood is no longer an “untouchable” risk for private insurers. For decades, the federally run NFIP was the only place where homeowners could buy flood insurance. But improved data, analysis, and modeling have helped drive private-sector interest in flood risk.

That’s good news for homeowners who understand the evolving nature of this peril, especially as FEMA’s new pricing methodology – Risk Rating 2.0 – applies more actuarially sound pricing to make NFIP’s premium rates more equitable. As NFIP rates become more aligned with principles of risk-based pricing, some policyholders’ prices are expected to fall, while many are going to rise.

CRS provides one avenue for communities to help their citizens get lower rates while proactively reducing flood risk.

Catastrophes, Disaster Preparedness, Disaster Resilience, Earthquakes, Emerging Risks, ESG, Flood Insurance, Floods, Insurers and the Economy, Legal Environment, Regulation, Risk Management

Triple-I Town Hall Amplified Calls
to Attack Climate Risk

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By Jeff Dunsavage, Senior Research Analyst, Triple-I

I’m pleased and proud to have been part of Triple-I’s Town Hall — “Attacking the Risk Crisis” — in Washington, D.C. In an intimate setting at the Mayflower Hotel on November 30, 120-plus attendees got to hear from experts representing insurance, government, academia, nonprofits, and other stakeholder groups on climate risk, what’s being done to address it, and what remains to be done.  

Triple-I’s first-ever Town Hall was designed as a logical step in its multi-disciplinary, action-oriented effort to change behavior to drive resilience. Capping a year in which headlines about “insurance crises” in several states garnered major media attention, Triple-I and its members and partners recognized the need for clarification.

“What we’re seeing is not an ‘insurance crisis’,” Triple-I CEO Sean Kevelighan told the standing-room-only audience. “We’re in the midst of a risk crisis. Rising insurance premium rates and availability difficulties are not the cause but a symptom of this crisis.”

Whisker Labs CEO Bob Marshall discusses innovation with moderator Jennifer Kyung, Vice President and Chief Underwriter at USAA.

While the insurance industry has a critical role to play and is uniquely well equipped to lead the attack, simply transferring risk is not enough. A recurring theme at the Town Hall was the need to shift from a focus on assessing and repairing damage to one of predicting and preventing losses.

Three moderated discussions – examining the nature of climate risk and its costs; highlighting the need of strategic innovation in mitigating those risks and building resilience; and exploring the role and impact of government policy – gave panelists the opportunity to share their insights with a diverse audience focused on collaborative action.

The agenda was:

Climate Risk Is Spiraling: What Can Be Done?

Moderator: David Wessel, Senior Fellow and Director at the Brookings Institution and former Economics Editor for The Wall Street Journal.

Panelists:

Dr. Philip Klotzbach, Colorado State University, researcher and Triple-I non-resident scholar.

Dan Kaniewski, Managing Director, Public Sector at Marsh McLennan, Former FEMA Deputy Administrator.

Jacqueline Higgins, Head, North America & Senior Vice President, Public Sector Solutions, Swiss Re

Jim Boccher, Chief Development Officer, ServiceMaster.

Jeff Huebner, Chief Risk Officer, CSAA.

Innovation, High- and Low-Tech: How Insurers Are Driving Solutions

Moderator: Jennifer Kyung, VP, Chief Underwriter, USAA.

Panelists:

Partha Srinivasa, EVP, CIO, Erie Insurance.

Sam Krishnamurthy, CTO, Digital Solutions, Crawford.

Bob Marshall, CEO, Whisker Labs.

Stephen DiCenso, Principal,Milliman.

Charlie Sidoti, Executive Director, InnSure.

Outdated Regs to Legal System Abuse: It Will Take Villages to Fix This

Moderator: Zach Warmbrodt, financial services editor, Politico.

Panelists:

Parr Schoolman, SVP and Chief Risk Officer, Allstate.

Tim Judge, SVP, Head Modeler, Chief Climate Officer, Fannie Mae.

Dan Coates, Deputy Director, DRS, Federal Housing Finance Agency.

Fred Karlinsky, Co-Chair of Greenberg Traurig’s Global Insurance Regulatory & Transactions Practice Group.

Panelists and participants alike appreciated the compact, action-focused, conversational nature of the single-afternoon event, as well as the opportunity to discuss areas in which their diverse industry- or sector-specific priorities and efforts overlapped.

If you weren’t able to join us in Washington, don’t worry. In his closing remarks, Kevelighan announced plans to take the program on the road with a local and regional focus, so stay tuned. You can contact us if you’re interested in participating in future Town Halls or other Triple-I events. You also can join the “Attacking the Risk Crisis” LinkedIn Group to be part of the ongoing conversation.

Disaster Preparedness, Disaster Resilience, Flood Insurance, Homeowners Insurance, Risk Management

Weather Risk Isn’t “Someone Else’s Problem,” Triple-I Executive Tells Weather Channel Viewers

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Of the findings in Triple-I’s recent report on consumer perceptions of weather risk, the Weather Channel’s experts were most struck by the fact that 60 percent of homeowners said they’d taken no steps to prepare – so, they asked Triple-I Chief Insurance Officer Dale Porfilio for his perspective.

Ultimately, Porfilio said, it comes down to perceptions.

“Two thirds of the people surveyed said they don’t expect to be affected by weather risk in the next five years,” Porfilio told the Weather Channel. “If you don’t think you’re going to be impacted, why would you prepare with a home evacuation plan or a home inventory?”

Of course, anyone who is exposed to weather is exposed to weather-related risk, and it’s essential for homeowners to understand and address the most relevant risks in order to protect their investments and their families.

Porfilio also addressed a question regarding availability of flood insurance, explaining that coverage is generally available through the Federal Emergency Management Agency’s National Flood Insurance Program, as well as a growing number of private insurers, but “might be perceived as too expensive.”

It is possible, however, that some insurers might not be willing to offer coverage in areas that have been hit repeatedly by flood.

Awareness and preparation are key. The Triple-I survey, published in coordination with global reinsurer Munich Re, found that, among the 22 percent of respondents who reported understanding their level of flood risk, 78 percent said they had purchased flood insurance. The report, Homeowners Perception of Weather Risks, provides insights into trends, behavior and how experiencing a weather event impacts consumer perceptions of future events. 

Learn More:

Survey Suggests Few Homeowners Prepare for Weather-Related Risks

Climate Risk Isn’t All About Climate: Population, Land Use, Incentives Need to Be Addressed

Stemming a Rising Tide: How Insurers Can Close the Flood Protection Gap

Catastrophes, Coastal Property, Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance, Legal Environment

Lawsuits Threatento Swell Ian’s Price tag

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Litigation costs could add between $10 billion and $20 billion to insured losses from Hurricane Ian, adding to the woes of Florida’s already struggling homeowners’ insurance market, says Mark Friedlander Triple-I’s corporate communications director.

Early estimates put Ian’s insured losses above $50 billion.

“Based on the past history of lawsuits following Florida hurricanes and the state’s very litigious environment, we expect a large volume of lawsuits to be filed in the wake of Hurricane Ian,” Friedlander said in an interview with Insurance Business America.

Most suits are expected to involve the distinction between flood and windstorm losses. Standard homeowners’ policies exclude flood-related damage from coverage, but differentiating between wind and flood damage in the aftermath of a major hurricane can be challenging.

Flood insurance is available from FEMA’s National Flood Insurance Program, as well as from a growing number of private carriers.

Trial attorneys are “already on the ground” and soliciting business in some of the hardest hit areas, Friedlander said. “This will be a key element in the solvency of struggling regional insurers who are already facing financial challenges.”

Six Florida-based insurers have already failed this year. Florida accounts for 79 percent of all U.S. homeowners’ claims litigation despite representing only 9 percent of insurance claims, according to figures shared by the Florida governor’s office. Litigation has contributed to double-digit premium-rate increases for home insurance in recent years, with Florida’s average annual home-insurance premium of $4,231 being among the nation’s highest.

“Floridians are seeing homeowners’ insurance become costlier and scarcer because for years the state has been the home of too much litigation and too many fraudulent roof-replacement schemes,” Triple-I CEO Sean Kevelighan said. “These two factors contributed enormously to the net underwriting losses Florida’s homeowners’ insurers cumulatively incurred between 2017 and 2021.”

Trevor Burgess, CEO of Neptune Flood Insurance, a St. Petersburg, Fla.-based private flood insurer, said that in all locations pummeled by Ian, the percentage of homes covered by flood policies is down from five years ago. Friedlander told Fox Weather that, while more than 50 percent of properties along Florida’s western Gulf Coast are insured for flood, “inland…the take-up rates for flood insurance are below five percent.”

While Florida is at particularly severe and persistent risk of hurricane-related flooding, the protection gap is by no means unique to the Sunshine State. Inland flooding due to hurricanes is causing increased damage and losses nationwide – often in areas where homeowners tend not to buy flood insurance.

In the days after Hurricane Ida made landfall in August 2021, massive amounts of rain fell in inland, flooding subway lines and streets in New York and New Jersey. More than 40 people were killed in those states and Pennsylvania as basement apartments suddenly filled with water. In the hardest-hit areas, flood insurance take-up rates were under five percent.

Damaging floods that hit Eastern Kentucky in late July 2022 and led to the deaths of 38 people also were largely uninsured against. A mere 1 percent of properties in the counties most affected by the flooding have federal flood insurance.

“We’ve seen some pretty significant changes in the impact of flooding from hurricanes, very far inland,” Keith Wolfe, Swiss Re’s president for U.S. property and casualty, said in a recent Triple-I Executive Exchange. “Hurricanes have just behaved very differently in the past five years, once they come on shore, from what we’ve seen in the past 20.”

Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance

Hurricanes Drive Louisiana Insured Losses, Insurer Insolvencies

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Max Dorfman, Research Writer, Triple-I

Severe hurricane damage in recent years has led to major losses by writers of Louisiana homeowners’ insurance and to the insolvency of eight insurers.

Louisiana homeowners’ insurers had a combined ratio of 461.9 in 2021. Combined ratio represents the difference between claims and expenses paid and premiums collected by insurers. A combined ratio below 100 represents an underwriting profit, and a ratio above 100 represents a loss.

With earned premium of nearly $2 billion, the 461.9 combined ratio means the industry experienced a $7.2 billion underwriting loss in 2021. As Triple-I Chief Insurance Officer Dale Porfilio puts it, “It would take 24 years of achieving a combined ratio of 85 for homeowners’ insurance writers in Louisiana to return to positive profitability.”

In 2020, Hurricanes Delta, Laura, and Zeta all caused major damage, resulting in a large number of insurance claims. Through September 30, 2021, there were 323,727 insurance claims of all types for these storms. Insurers paid or reserved $9.1 billion for Laura alone. Additionally, Hurricane Ida, which occurred in 2021, generated 460,709 insurance claims of all types through June 30, 2022, with insurers having paid or reserved $13.1 billion for that storm.

Eight Louisiana homeowner insurers already have become insolvent, and at least 12 companies have submitted withdrawal notices to Louisiana’s Department of Insurance, a preliminary measure needed to leave the state. This has forced tens of thousands of homeowners to depend on the state’s insurer of last resort, Louisiana Citizens Property Insurance Corp.

The market is struggling so much that Louisiana Insurance Commissioner Jim Donelon has called the current circumstances a “crisis.”

Next steps

In response, the Louisiana Insurance Guaranty Association (LIGA) has begun to restructure its management of claims for policyholders of insolvent insurers using property estimating technology from Verisk, a global data analytics provider.

“Seamless coordination with independent adjusting firms has become critical as we work to help hurricane victims throughout Louisiana rebuild their homes and return to normal,” said John Wells, executive director of LIGA.

More work to be done

A 2020 Triple-I Consumer poll found that 27 percent of homeowners said they had flood insurance, which indicates a record high. However, this figure is greater than National Flood Insurance Program (NFIP) estimates. As the Triple-I notes, homeowners may not understand what flood coverage is and how it works — specifically, that flood damage is not covered under standard homeowners’ and renters’ insurance policies. Flood coverage is available as a separate policy from the National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA), and from many private insurers

As storms continue to wreak major damage across vulnerable areas, homeowners and flood insurance are more important than ever.  But risk transfer alone is not enough.  

“Risk transfer is just one tool in the resilience toolkit,” says Triple-I CEO Sean Kevelighan. “Our understanding of loss trends and expertise in assessing and quantifying risk must be joined at the hip to technology, public policy, finance, and science. 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.”

Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods, Risk Management

Flood: An Insurable Peril That’s Underinsured

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By John Novaria, Managing Director, Amplify

This year’s hurricanes have served as a wakeup call about the importance of flood insurance and the fact that not enough people have it. Only 1 in 6 homes in the United States is insured against flood, yet 90 percent of natural catastrophes in the country involve flooding.

More of the population is moving into flood-prone areas. Not only does this increased residential and commercial development put more people in harm’s way, it reduces the amount of land available to absorb excess water. This means more homes and businesses inundated, more contents damaged or destroyed, and more vehicles immersed.

Nowadays, flooding tends to cause more costly damage than wind. An average storm year will generate uninsured losses of $10 billion due to flooding, compared to insured losses of $5 billion.

“One of the most frustrating things for our industry related to flood is that this is actually an insurable peril and it’s broadly uninsured,” said Keith Wolfe, president of U.S. property & casualty insurance at Swiss Re. Wolf recently spoke with Triple-I CEO Sean Kevelighan, in the latest edition of Triple-I’s Executive Exchange, about closing the flood-protection gap.

That’s changing, however, as the public and private sectors work together to improve consumer behavior and harden communities. The private market is slowly but surely closing the flood protection gap as it emerges as a viable complement to the National Flood Insurance Program.

Improvements in modeling are making this peril more insurable, and private companies are recognizing the flood-insurance opportunity and entering the market. According to Swiss Re, flood represents a $1.1 billion growth opportunity for insurers.

Catastrophes, Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance

Relocated Due to Ida? You Might Be Covered for Additional Living Expenses

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Standard homeowners and renters insurance policies include additional living expenses (ALE) coverage. ALE pays the costs of living away from home—above and beyond your customary expenses— if you cannot live at home due to damage caused by an insured event that makes the home temporarily uninhabitable.

What expenses are typically covered by ALE?

ALE covers living expenses incurred by you so your household can maintain its normal standard of living.  These expenses could include:

  • Temporary housing
  • Moving costs
  • Grocery or restaurant bills 
  • Storage costs
  • Laundry expenses
  • Transportation (e.g., if your temporary home requires a longer commute)
  • Parking fees
  • Pet boarding

Your homeowners policy’s ALE coverage is usually equal to 20 percent of your home’s insured value—a home insured for $200,000, for instance, may have ALE coverage of up to $40,000—or limited to a certain timeframe (e.g., no more than 12 months).

What about Damage from Hurricane Ida?

Standard ALE coverage should be triggered if damage from a covered peril (e.g., wind and rain) caused the home to be uninhabitable. In addition, some companies provide ALE coverage when policyholders leave their home or apartment due to mandatory evacuation orders. Policyholders should speak with their insurance professional to confirm whether their policy provides ALE coverage for their situation.

As a reminder, standard homeowners insurance policies typically do not provide coverage for flood damage. The National Flood Insurance Program (NFIP) covers physical damage from flood but does not include ALE. Some privately sold flood policies offer ALE following flood losses. 

What Other Help Is Available?

Federal assistance has been made available through the Federal Emergency Management Agency (FEMA). On September 2, FEMA announced they will cover hotel expenses for survivors of Hurricane Ida with damaged homes or dwellings in 25 parishes in southeast Louisiana.

The program, known as Transitional Sheltering Assistance, will provide survivors with short-term housing free-of-charge as they recover from the Category 4 storm. Survivors must first register with FEMA at disasterassistance.gov or by calling the FEMA helpline at 800-621-3362. Those wishing to take advantage of the program must find and book their own hotel rooms. Participating hotels are listed at www.femaevachotels.com.