Custom Flood Protection For Small Businesses

Across the entire United States, the occurrence of natural disasters is rising in frequency. The Federal Emergency Management Agency (FEMA) recently reported that flooding is the most frequently occurring natural disaster in the country. Small businesses cannot predict when or where the next big flood will strike, but they can be better prepared with the proper flood insurance coverage. With flood risks so high, it may be surprising to find that many small business owners still remain uninsured. Why does such a large protection gap continue to exist?

Many small business owners are managing their business expenditures on a tight budget. Most do purchase a small business insurance policy, but flood coverage is rarely a part of the covered perils. Sometimes the only flood coverage a small business owner can purchase is the NFIP non-residential preferred risk policy which fails to differentiate between the level of hazard within a flood zone. With extreme storms causing bodies of water to inundate areas that were previously not impacted by flooding, business owners outside of FEMA’s Special Flood Hazard Areas (SFHA) are taking a huge risk when they choose to go uninsured.

From 2011 to 2015 the average commercial flood claim in the U.S. was US $90,000. For small businesses that are uninsured, this much loss could leave many with too much debt to overcome. Read my recent article on the severity that flood risks present to small business owners. When Munich Reinsurance America, Inc. (“Munich Re”) discovered this growing trend of uninsured small businesses, we looked to our clients to help us develop a new endorsement that could work as an affordable flood insurance solution for small business owners.

Our Commercial Lines Flood Coverage is a private-label endorsement and is off-the-shelf ready for ISO participating companies. Risk scoring was added to differentiate between flood hazard at different locations within a flood zone.

While FEMA does offer flood coverage for businesses, their current packages may not offer the right solution. FEMA policies do not cover business interruption (loss of income), and this can be one of the biggest reasons small businesses struggle to recover from natural disasters. Munich Re developed its endorsement to be broader in scope and thus included business interruption as part of the flood coverage. This loss of income inclusion should not only help businesses recover but also get them back up and running again more quickly.

Munich Re is taking a lead role in helping to reduce the flood protection gap by creating custom solutions with our clients’ needs in mind. Our commercial flood Coverage provides adequate coverage at affordable rates so small businesses can focus on the most important thing—running their business.

To learn more about Munich Re’s commercial flood solution, click here.

Any descriptions of coverage are meant to be general in nature and do not include nor are intended to include all of the actual terms, benefits and limitations found in an insurance policy. The insurance policy will form the contract between the insured and insurance company, and exclusively governs in all cases.