Facing the flood

New commercial program from Philadelphia Insurance offers broad coverage, high limits

By Elisabeth Boone, CPCU

In a summer during which many parts of the country are enduring triple-digit temperatures, destructive storms, severe drought conditions, and wildfires, the risk of flooding may seem remote by comparison.

Even in locations where the flood risk is low, however, a sudden storm can trigger flash flooding that damages or destroys buildings and contents. During a long spell of wet weather, creeks, ponds, and rivers may overflow their banks with the same results. As anyone who has been through it will attest, dealing with the aftermath of a flood is not only emotionally draining but also can be financially devastating.

Since passage of the National Flood Insurance Act in 1968, the federal government has partnered with private insurers and agents to offer flood insurance to the owners and renters of both residential and commercial properties. Administered by the Federal Emergency Management Agency, the National Flood Insurance Program (NFIP) currently works with almost 90 insurers, one of which is Philadelphia Insurance.

As an authorized federal flood insurance writer with NFIP in all 50 states, Philadelphia Insurance has built a team of specialists who are experienced in identifying the flood insurance needs of businesses, analyzing flood exposures, and designing coverage to address those exposures, says Neal Schmidt, vice president of underwriting in the specialty property division.

"We decided to evaluate our NFIP book of commercial flood risks to determine if there was an opportunity to move some of that business out of the federal program, price it appropriately based on specific risk characteristics, and underwrite these accounts profitably in a new program," Schmidt explains.

"Our sister company, an MGA/MGU called WNC First Insurance Services, has a strong background in writing flood business, so we partnered with them to create the Commercial Primary Flood Insurance program as an alternative to the NFIP commercial flood insurance program," Schmidt says. "With input from WNC First, we use sophisticated modeling tools to analyze our NFIP commercial flood book and do risk selection and pricing of those accounts."

The new product, Schmidt emphasizes, is not designed to compete with the NFIP commercial flood program. "We continue to be strong supporters and promoters of the NFIP program," he asserts. "In fact, we believe that the availability of our new product may actually strengthen our NFIP book."

The Philadelphia/WNC First program targets specific classes with carefully defined attributes and offers coverage and limit options that are not available in the NFIP program.

"For example, the maximum limit for commercial property in the NFIP program is $500,000, whereas we can provide limits up to $5 million on the building and contents," Schmidt says. "We also offer business income with a limit of $100,000 and replacement cost coverage, which are not available from NFIP."

Broad and budget friendly

The Philadelphia Insurance/WNC First commercial flood program, Schmidt explains, is designed to provide comprehensive coverage at affordable rates for eligible businesses. "Our product is a single-peril policy that provides primary coverage; it's not intended to be written excess over the NFIP program," he emphasizes.

The program targets non-coastal properties of the following types: office buildings, apartment complexes, hotels/motels, shopping centers, restaurants, light manufacturing, and risks with replacement value of under $15 million. Risks that are subject to storm surge or tidal surge are ineligible.

"Our choice of these target classes was based in large part on the performance of those classes," Schmidt explains. "We relied heavily on input from WNC to steer us in the right direction." Although occupancy unquestionably is an important underwriting consideration, he remarks, "The peril of flood cuts across all occupancies. The key driver in our risk selection process is location."

Each policy is individually rated based on the property's location, elevation, flood zone, number of stories, construction type, foundation, and loss history. An elevation certificate is not required, and coverage is available for high-hazard flood zones. Insureds have the option to schedule multiple locations on a single policy. Deductibles range from $1,000 to $100,000. Coverage is written with Philadelphia Insurance Companies, which are rated A++/XV by A.M. Best.

"We target smaller properties with superior elevation and no history of flooding," Schmidt says. "We anticipate that most accounts will be in a range of $1,000 to $2,000 in premium. As an alternative to the NFIP program, our product is an attractive option for those accounts that have what we consider favorable risk characteristics."

For more information:

Philadelphia Insurance Companies

Web site: www.phlyins.com

WNC Insurance Services

www.wncinsuranceservices.com