Flood Risk Solutions places primary and excess flood insurance programs
on behalf of select insurance partners across the United States

The market for flood is a hot topic across the United States, for a variety of reasons, and will likely get even hotter, as time progresses. One such topic is what agent’s do with their client’s moving forward? Broker’s are torn between sticking with their familiar NFIP program’s that have been in existence and provided a backstop for their customer’s over the past 30 years, or look to the private market that has seen significant signs of development over the past few years.

Given the progression of flood modeling, big data, and technology improvements, there is been an uptick across the board from both admitted and non-admitted players in critical flood zones. As carriers are able to understand their PML’s and aggregation on a more granular level, this has helped produce actuarially sound rates and reinsurance capacity.

In coastal geographies such as Florida, there are a few carriers willing to write the coverage on their own paper on an admitted basis or partner with a London based solution and offer the coverage as an add-on to their existing multi-peril offering. The mono-line segment continues to grow as well, mainly through London syndicates and domestic E&S players.

For the agents who have already taken the leap of faith into the private market, so far, the response has been positive for both personal residential and commercial risks. The private product is offering higher limits greater than $250,000 for residential and $500,000 for commercial, alleviating an E&O exposure, and foregoing the need of an excess placement. Additionally, the coverage from a commercial perspective has been broader to include Business Income, and less onerous coinsurance provisions that come into play on commercial residential(condo’s/apartments), as well as lower deductibles.

There are agents who have resisted the private market and continue to support the NFIP program given the higher commission structure, while the product has proved a viable solution over time. Banks and lenders are also in the process of learning the market and have pushed back on some private solutions, if the coverage is not the same or greater to the NFIP program. This has resulted in many carrier’s form to be replicated on a Me Too basis of the NFIP product, to alleviate any issues with the financial institution, however will be supplemented by extensions and endorsements.

As the marketplace grows, there will be much debate over which solution is the best for your client’s, however the outcome will most likely be a hybrid result with the NFIP and private sector playing in various capacities and various geographies. As time goes on we will continue to provide updates on our take on the private and public markets and their cost and benefits for each.

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FEMA has recently moved towards a new risk based rating system Risk Rating 2.0, which aimed to accomplish this by leveraging industry best practices and current technology to deliver rates that are fair, easy to understand, and better reflect a property’s unique flood risk. Here’s a summary video:

The new rating approach has indeed provided a mixed batch of pricing results. Many of the properties which previously enjoyed artificially low premiums have been subject to substantial annual increases (as much as 18%), giving opportunities to private flood insurance sector to offer terms that can effectively compete with the NFIP.  With a single entry multiple quote system, FRS is able to display the NFIP terms along side terms offered by the private sector, allowing the broker and consumer to make the best available purchase decision.

At the same time, Risk 2.0 has kept many with pricing that is still well below what the private sector is willing to yet offer. In these cases, FRS is able to facilitate the purchase of the NFIP policy using the flood rater and also make available excess limits above the NFIP, seamlessly.

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