SLIDE 1
CONFIDENTIAL
1
CONFIDENTIAL
2
Agenda
NFIP limitations Privatization:
- Potential benefits
- Potential barriers to entry
Source: http://www.naplia.com/resources/pdf/admitted%20vs%20non-admitted%20insurance%20coverage.pdf
GRC AR!SE Insurance Climate Change Roundtable Session: How can - - PowerPoint PPT Presentation
GRC AR!SE Insurance Climate Change Roundtable Session: How can - - PowerPoint PPT Presentation
GRC AR!SE Insurance Climate Change Roundtable Session: How can state insurance policies advance climate resilience in the property sector? September 17, 2015 1 CONFIDENTIAL Agenda NFIP limitations Privatization: Potential benefits
SLIDE 2
SLIDE 3
CONFIDENTIAL
3
86% of NFIP policies are for 1-4 family homes Property owners think homeowners insurance covers them Flood insurance take-up ~3x higher for homes required to buy it
- 55% of 1-4 family homes buy flood coverage in high risk floodplain
- 65% of ~20,000 homes with a mortgage mandated to carry insurance have policies
- 20% of those without a mortgage have coverage
Current premiums for structures built pre-1983 (“pre-FIRM”) are nearly 2x those built post-1983 (“post-FIRM”)
- “Pre-FIRM” average premiums $1,800 vs. $1,000 for “post-FIRM”
Annual premium increases are expected to be as high as $10,000
Very difficult to assess flood insurance for multi-family buildings, which account for ~80% of residential units, and determine the right policy response.
NYC flood insurance market understanding
SLIDE 4
CONFIDENTIAL
4
NFIP limitations: narrow mitigation options
These building types reflect the diversity of dense urban environments.
- Expensive – and can often be hard to finance
- Challenging site conditions – attached structures or narrow lots
- Loss of units – economically infeasible for many commercial or multi-
family buildings Elevation challenges
SLIDE 5
CONFIDENTIAL
5
NFIP limitations: flood insurance product
What’s not covered by NFIP:
- Personal property coverage limited to actual cash value rather
than replacement value
- Paneling, bookcases, and window treatments such as curtains
and blinds
- Carpeting, area carpets, and other floor coverings such as tile
- Drywall for walls and ceilings (below the lowest elevated floor)
- Most personal property such as clothing, electronic equipment,
kitchen supplies, and furniture
- Property value above $250,000
- Contents value $250,000
- Limited basement coverage
- Etc
SLIDE 6
CONFIDENTIAL
6
WYO Premium Gold Standard $400 or $8000 (elevation) Finnegan (Allstate) $1900 WYO Premium Fillmore Agency $3,577 Sheepshead Bay Agency $1,858 Allstate Insurance $845-959
NFIP limitations: customer experience
A-zone mystery shopping results show inconsistent premium quotes. Agents lack training and create confusion for homeowners
SLIDE 7
CONFIDENTIAL
7
7
NFIP limitations: agent training
Training is not tailored to dense urban settings.
Source: FEMA Basic Agent Training Powerpoint 1
SLIDE 8
CONFIDENTIAL
8
8
NFIP limitations: agent training
SLIDE 9
CONFIDENTIAL
9
NFIP limitations: rating urban buildings
NAS report suggests ways to more accurately determine rates for low-lying structures.
- 1. Better define water surface elevations for frequent floods
- 2. Use local rather than national flood data
- 3. Research drivers of flood damage beyond inundation
depth, such as flood duration, water contamination, and debris content
- 4. Build a large set of flood damage reports from relevant
agencies
Source: http://www.nap.edu/catalog/21720/tying-flood-insurance-to-flood-risk-for-low-lying-structures-in-the-floodplains
Example recommendations to improve rate setting: Current rate-setting poses many questions for older building stock
SLIDE 10
CONFIDENTIAL
10
10
Our Growing, Thriving City Our Just and Equitable City Our Sustainable City Our Resilient City
NFIP limitations: operational efficiency
“FEMA cannot answer basic questions about customers, claims, and WYOs due to antiquated IT or lack of processes to capture and report info in real time.”
10
SLIDE 11
CONFIDENTIAL
11
RAND Table 5.1. Source: Census Data.
NFIP limitations: addressing affordability
Premiums are projected to increase to unaffordable levels. Even annual increases pose a challenge for residents on a fixed income Four Feet Below BFE At BFE Three Feet Above BFE
SLIDE 12
CONFIDENTIAL
12
12
Our Growing, Thriving City Our Just and Equitable City Our Sustainable City Our Resilient City
12
Privatization: potential benefits
NFIP versus hypothetical private premiums show more competitive pricing.
Source: Milliman
- St. Petersburg, FL
SLIDE 13
CONFIDENTIAL
13
13
Our Growing, Thriving City Our Just and Equitable City Our Sustainable City Our Resilient City
Privatization: potential benefits
Quick, transparent quotes would enhance the customer experience.
13
SLIDE 14
CONFIDENTIAL
14
Privatization: entry barriers
Various stakeholders may get in the way of new private entrants.
Key questions need to be addressed:
- Will banks accept it?
- Will state insurance regulators allow it?
- Are WYOs permitted to sell it?
Source: http://www.naplia.com/resources/pdf/admitted%20vs%20non-admitted%20insurance%20coverage.pdf
SLIDE 15
CONFIDENTIAL
15
nyc.gov/resiliency @NYClimate
SLIDE 16
CONFIDENTIAL
16
Hurricane Sandy Insured Losses by State
16
SLIDE 17
CONFIDENTIAL
17
Hurricane Sandy Insured Losses by Line
17
SLIDE 18
CONFIDENTIAL
18
Hurricane Sandy Claims by Line
18
SLIDE 19
CONFIDENTIAL
19
Hurricane Sandy Claims - Private/Public
19