Posted in News on 03 Sep 2019

At the time of writing, Hurricane Dorian is hitting The Bahamas and may hit the coast of Florida in the next few days; every county in Florida is under a state of emergency as the state prepares for what may be the strongest hurricane to hit its east coast in nearly three decades. At 105 mph, Dorian is the strongest storm of the Atlantic hurricane season so far – Look out for our Hurricane Dorian update in our next stop press.

Floods are the most common and costly natural disaster in America, according to FEMA (Federal Emergency Management Agency), causing billions of dollars in damage every year. On average, floods cost Americans $8.2 billion in damages annually.

Yet it is only after an event that insurance is taken out or renewed, whether a homeowner, construction conglomerate or business premises. The flooding does not even have to be extensive, to hurt pockets and balance sheets alike. According to FEMA estimates, recovering from just an inch of water inside your building can cost about $27,000. Without flood insurance, a homeowner or business premises would be burdened with covering the costs of those renovations entirely on their own.

The National Oceanic and Atmospheric Administration (NOAA) warned earlier this month [1] that “above-normal hurricane activity” has been predicted for hurricane season, which will run until Nov. 30 and Hurricane Dorian may well be proof of the gravity of their predictions.

In the forecast, five to nine hurricanes are expected, with at least two of those classified as “major hurricanes.”

There are also 10 to 17 named storms — which have winds of 39 miles per hour or greater — anticipated for the region.

On average during the season, there are 12 named storms, of which six escalate to hurricanes, according to NOAA.

The latest forecast comes as NOAA updated their seasonal predictions to reflect that the likelihood of an above-normal Atlantic hurricane season was at 45 percent — up from the 35 percent figure forecasted three months ago.

Post event, many uninsured small business owners are forced to spend personal funds or take out loans from the Small Business Association, which can put undue financial pressures on them. The financial damage also hurts commercial businesses. For instance, the announcement comes not long after the second anniversary Hurricane Harvey, whose floodwaters covered an area the size of New Jersey leading to the number of federal flood insurance policies increasing by 32 percent in Harris County.

Houston, in Harris County, suffered the brunt of Harvey when it made landfall in Texas . Harvey unleashed nearly 50 inches (130 centimetres) of rain on parts of the flood-prone city. The storm killed nearly 70 people, damaged more than 300,000 structures and caused an estimated $125 billion in damage.

Commercial properties found themselves in trouble, for example West Houston Airport, where the runway and around 80 hangars were submerged under up to 2 feet (60 centimetres) of water. The terminal was swamped and almost a dozen planes were rendered useless.

In fact, the airport had never needed flood insurance in its more than 50-year history. A month after Harvey, the airport purchased a policy.

Many business owners are unaware of their proximity to flood zones. A commercial location outside of a flood zone is not necessarily immune to the possibility of a flood event. While the business may save some money in the short-term by not having flood insurance, they are taking an even greater risk on the long-term sustainability of their business. One flash flood or severe storm could put them literally and financially under water.

FEMA reported that roughly 40% to 60% of small businesses that close due to destructive events never open their doors again. Ellicott City, MD, experienced a flash flood on July 30, 2016, which severely displaced the economic growth of the local businesses. Prior to the flood, the downtown Main Street corridor directly contributed US$ 124.2 million in business activity to the county and employed 955 people. As a result of the flash flood, economic activity in the county could be reduced by US$ 42.4 million.

Commercial flood coverage should be an urgent concern for all small businesses, inside and outside of flood zones. A single flash flooding event can make a huge economic impact in the magnitude of losses to a given location. A more severe example of flood losses can be seen with the example of Hurricane Harvey itself. With four days of rainfall, the tropical cyclone inflicted US$ 125 billion in damages to the Houston metropolitan area. The most troubling fact was that about 70% of the damages were uninsured, leaving many businesses without any recovery funding.

With flooding on the rise, small business owners are left in a precarious position while they search for an affordable solution to this unpredictable and stormy future.

While memories may fade after the initial impact of such major floods, resulting in a downturn in policies purchased and renewed, they soon pick up as soon as another major event happens.

In Louisiana, after Hurricanes Katrina and Rita in 2005, the number of flood insurance policies jumped from 380,000 to 490,000 in one year. That fell to 450,000 but then climbed again after catastrophic flooding in Baton Rouge and Lafayette in 2016.

The year after Superstorm Sandy in 2012, flood insurance policies increased by 2 percent in New Jersey and 12.5 percent in New York. But since the end of 2013, policies have dropped by 7.4 percent in New Jersey and 8 percent in New York.

Flooding is the number one natural disaster in the US, causing billions of dollars in damage to hundreds of thousands of businesses and homes annually. Yet flood insurance is one of the most misunderstood coverage types. It is therefore critical for commercial business and real estate owners, property managers and developers, and homeowners to understand flood insurance options and choose a policy that addresses their specific needs.

 
About Alesco
   
 
Alesco is a specialist insurance and risk management business located in the heart of the City of London. Founded in 2008 by a team of experienced professionals, we provide a wide range of risk-management services and insurance solutions which are fundamental for protecting organisations. We work closely with underwriters in the London markets, in key global insurance centres, and with local broking partners in 150 countries.

   

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