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.

Because of the nature of the coverage, there are some natural similarities with the NFIP plan. Causes of loss including overflow of inland and tidal waters, rapid accumulation of surface waters from any source, and collapse or sinking of land along the shore of a body of water caused by flooding are all familiar to those familiar with the NFIP plan.

 Instead of a thirty-day waiting period for coverage to take effect, the ISO program has a 72 hour waiting period, unless prior flood coverage was in effect for at least 72 hours preceding the inception date of the policy without a lapse in coverage. Time element coverage is included, and a number of endorsements are available to modify coverage as required. The form is Commercial Flood Policy FC 00 01 04 18

This premium content is locked for FC&S Coverage Interpretation Subscribers

Enjoy unlimited access to the trusted solution for successful interpretation and analyses of complex insurance policies.

  • Quality content from industry experts with over 60 years insurance experience, combined
  • Customizable alerts of changes in relevant policies and trends
  • Search and navigate Q&As to find answers to your specific questions
  • Filter by article, discussion, analysis and more to find the exact information you’re looking for
  • Continually updated to bring you the latest reports, trending topics, and coverage analysis