Includes copyrighted material of Insurance Services Office, Inc., with its permission.

 March 19, 2018

This year particularly, damages from hurricanes have brought significant attention to the existence, or lack thereof, of adequate coverage for floods. Water weighs 1700 pounds per cubic yard, which creates severe damage when flowing against property. Standard property policies exclude flooding; in order to obtain coverage a form must be purchased through the National Flood Insurance Program (NFIP). Coverage through this program is limited, and while the rates are not actuarially sound, many complain that coverage is too expensive. When legislation was passed that would raise the premiums over time it lasted about two years before the public outcry forced a rollback of that position.

A number of proposals exist trying to change the flood program, and some are encouraging private carriers to move into a position to provide coverage. Part of this is driven by better analytical tools available to carriers in order to model potential exposures so that sound rates can be developed. Because of this increased knowledge and the limited capacity of the NFIP ISO has developed a commercial flood policy. This policy has been filed with an effective date of April 2018. As that is not far away, we are presenting an analysis of the form as it was filed. Due to the length of the article, we have broken it into sections for ease of reference. See FC 00 01 04 18.

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