Flood: How to Protect Your Business from a Natural Disaster

Transcription

1 Flood: How to Protect Your Business from a Natural Disaster Speakers: Greg Bates, Managing Consultant, Global Risk Consultants (GRC) Frank Francone, Manager, Insurance & Risk Services, General Growth Properties (GGP)

2 Learning Objectives Learning Flood Basics: Type and Risks Identifying Facility Flood Exposure Understanding Flood Risk Reduction Options Reviewing Insurance Requirements and Options Specifically National Flood Insurance Program (NFIP) 2

3 Top 20 Nat-Cat Insured Losses /13/2008 Cedar Rapids, IA flood. Source: Boston Globe 3

4 Flood Basics Floods happen when water (from rivers, oceans, bays, lakes canals, etc.) overflows normal boundaries or when storm water runoff causes flash flooding. 6/13/2008 Cedar Rapids, IA flood. Source: Boston Globe 4

5 Flood Types Storm Surge from windstorms (hurricanes and typhoons). Affects coastal areas. Tsunamis following major earthquakes. Riverine Flooding is in-land flooding along rivers that can be very deep (3-6m or more). Cause is usually heavy runoff (e.g., snow melt) and rains of long duration. Flash Flooding is sudden flooding from surface runoff due to inability of the ground/surface to absorb rainfall. Coastal Flooding is typically shallow (1m or less) flooding by sea water, due to higher than average tides combined with heavy rains/runoff. Global Warming causes rising seas; which will affect all coastal areas like Bangkok, New York and Shanghai. 5

6 Flood Types Storm Surge Source: NOAA, FEMA and USGS 6

7 Flood Types Tsunamis M9.0 Japan Earthquake March 11, 2011 Source: Yahoo News and Miyamoto International 7

8 Flood Types Riverine Flooding 2011 Thailand Flood Source: Getty 8

9 Flood Types Flash Flooding Sept. 9, 2014 Nevada Flooding. I 15 flood damage near Moapa, NV from 4 inches of rain in 2 hours from remnants of Hurricane Norbert. Sources: Associated Press and Wall Street Journal 9

10 Flood Types Coastal Flooding and Global Warming Source: nwclimate.org and NOAA 10

11 Factors Affecting Flood Levels Rainfall Intensity and Duration - The government has this data for every part of the country. There are rain gages all over the country. Ground Saturation - Saturated soils will no longer absorb and retain flood waters. Landscape - Forests retain water better than farms; which are better than lawns; which are better than asphalt. Development - Human development reduces land's ability to absorb and drain flood waters. Development can also reduce a flood plain and squeeze the river channel. Topography - Slope sites drain faster and flat sites slower. Valleys will retain flood waters. Flood Control Systems - Drain and protect an area from flooding. Tides - High tides make flooding worse. 11

12 Key Questions Everyone Should Ask Likelihood of flooding in your area Are you in a flood zone? What flood sources are significant? What would be the impact on your site in case of a flood? Do you have flood protection in place? What and how much protection does it provide? How do you mitigate the risk? 12

13 Flood Exposure Identification WHAT ARE THE ODDS OF BEING FLOODED? The term "100-year flood" has caused much confusion for people not familiar with statistics. Another way to look at flood risk is to think of the odds that a 100-year flood will happen sometime during the life of a 30-year mortgage - 26% chance for a structure located in the SFHA. P=1-[1-(1/T)] n. P = Probability, T = storm return period, n=no of yrs. Chance of Flooding over a Period of Years Period 10 yr flood 25 yr flood 50 yr flood 100 yr flood 1 year 10% 4% 2% 1% 10 years 65% 34% 18% 10% 30 years 96% 71% 45% 26% 50 years 99% 87% 64% 39% 100 years 100% 98% 87% 63% Even these numbers do not convey the true flood risk because they focus on the larger, less frequent, floods. If a house is low enough, it may be subject to the 10- or 25-year flood. During a 30-year mortgage, it may have a 26% chance of being hit by the 100-year flood, but the odds are 96% (nearly guaranteed) that it will be hit by a 10-year flood. Compare those odds to the only 1-2% chance that the house will catch fire during the same 30-year mortgage. 13

14 Identifying Flood Exposure Online Flood Mapping Tools Overview of free online tools. Online flood zone determination. Downloading a flood map for your site. Understanding flood zones and risks. How to contest a flood zone designation if you are above a flood zone, to decrease insurance costs. Source: Google Maps 14

15 Identifying Flood Exposure Source: FEMA 15

16 Identifying Flood Exposure Source: FEMA 16

17 Identifying Flood Exposure Source: FEMA 17

18 Flood Zones and Risk Source: FEMA 18

19 Identifying Flood Exposure Source: FEMA 19

20 Identifying Flood Exposure 20

21 You are In. Now What? Flood elevation vs. building elevation. Elevation surveys to identify Base Flood Elevations (BFE). Letter of Map Change (LOMC) if you are above the flood zone. Source: FEMA 21

22 You are In. Now What? LOMC Letter of Map Change If a property owner thinks their property has been inadvertently mapped in a Special Flood Hazard Area (SFHA), they may submit a request to FEMA for a Letter of Map Change (LOMC). A SFHA is defined as the area that will be inundated by the flood event having a 1- percent chance of being equaled or exceeded in any given year. A LOMC reflects an official revision/amendment to an effective Flood Insurance Rate Map (FIRM). If the LOMC request is granted, property owners may be eligible for lower flood insurance premiums, or the option to not purchase flood insurance. 22

23 Reducing Flood Loss Education (baseline information and risk assessment) Understand the threat (risk assessment) and required actions and consequences sources of flooding. Know your flood protection systems pump station key, flood gate operations, etc. Know your facility, important infrastructure and utilities, people, equipment, risk locations, access/exit points, etc. Preparation Prevention (structural fixes) vs. response - usually a combination of both. Develop and update emergency recovery plan (everything on this page) Flood defense supplies sandbags, plastic sheets, barriers, generators, pumps, etc. Flood clean up supplies generators, lights, hoses, shovels, brooms, etc. Identify resources staffing, experts, contractors, equipment rental, key contacts, etc. Define and document roles, responsibilities and actions for flood warnings. Develop evacuation and refuge plans and post event actions. Practice / drills. During the Flood Monitor rain and flood levels and warnings. Notify authorities and utilities of flooding and request utility shut off, if compromised. Control activities in flooded areas. Repair damage flood defense systems. Follow plant shut down, evacuation, lockdown and refuge procedures. After the Flood Damage assessment. Structural stabilization and repairs. Document flood levels and damage for claims. Clean up. Repair/replace flood damaged equipment. Restart and reoccupy. 23

24 Flood Risk Assessment Review flood hazard information such as NOAA rainfall records, FEMA and US Army Corps of Engineers flood maps, topographic maps, site grading drawings and flood history for the area to understand the flood hazard levels. Perform a site survey of the plant and surrounding areas to observe construction, operations, storage systems, and process, production, transportation and utility equipment to assess flood vulnerability. During the site survey, also visit nearby flood defense systems such as dikes, levees, pumps and flood walls to assess condition and effectiveness. Interview on-site staff to understand equipment and infrastructure requirements for operation, susceptibility of various types of contents to damage, and local on-site flood preparedness procedures. Review construction documents for flood vulnerability. Assess flood risk/exposure, business impacts, and expected losses. Develop recommendations to reduce flood risk. Recommendations generally include both hard and soft fixes. 24

25 Flood Mitigation Options Hard fixes: permanent measures Site selection for new sites. Regional vs. site flood protection systems. Barriers such as levees and flood walls. Re-grade site and grounds to drain away from buildings. Concrete skirt walls. Improve drainage systems to divert & remove water from buildings. Pumps, valves and flood gates. Flood resistant designs (structural & nonstructural). Elevate key buildings and equipment. Soft fixes: emergency response & planning measures Regional vs. site. Emergency plan for location and risk. Temporary barriers such as sand bags, movable and inflatable barriers. Portable emergency generators and pumps. Flood barriers/gates to block openings and drains. Move/relocate critical equipment and contents. Insurance. 25

26 Examples of Hard Fixes Source: FEMA 26

27 Examples of Soft Fixes Source: California Department of Water Resources Source: University of Iowa 27

28 Reviewing Insurance Requirements and Options Policies Traditional Insurance Global Property Policy National Flood Insurance Program (NFIP) 28

29 Development of National Flood Insurance Program (NFIP) National Flood Insurance Program Administered Directly by FEMA Enables property owners to purchase flood insurance as an alternative to federal disaster assistance Communities must formally agree to regulate the use of their flood-prone lands Communities adopts certain NFIP-FEMA codes and ordinances Once adopted; FEMA will make flood insurance available to the community. FEMA identifies these flood hazard areas on maps and provides these maps to communities for carrying out their responsibilities 29

30 National Flood Insurance Policy When is a NFIP mandatory? Residents of High-Risk Areas- Special Flood Hazard Area (SFHA) per FEMA Maps Homes and buildings in high-risk flood areas with mortgages from federally regulated or insured lenders are required to have NFIP flood insurance. Special Flood Hazard Area (SFHA) The area (also known as a 100 year Flood Zone) where the National Flood Insurance Program's (NFIP's) floodplain management regulations must be enforced and mandated flood insurance is required. The Most Common SFHA includes Zones A, AE, VE and V 30

31 Preferred Risk Policy (PRP) PRP is available to properties in Moderate to Low Risk Flood Zones Residents of Moderate-to-Low Risk Areas per FEMA Maps Homes and businesses located in moderate-to-low risk areas that have mortgages from federally regulated or insured lenders are typically not required to have flood insurance. A lender can require flood insurance, even if it is not federally required Moderate risk includes zones B and X-Shaded Zones Low risk includes zones C and X-Unshaded 31

32 Residential Condominium Building Association Policy The Residential Condominium Building Association Policy Form is issued to residential condominium associations on behalf of association and unit owners. Includes Mixed Use buildings where 75% of floor area is designated as Residential Not Placing the correct coverage often leads to a large gap in coverage 32

33 Policy Limits NFIP Insurance Policy Coverage Available Under The NFIP (Table Applies to PRP as well) Building Limits Basic Limits Additional Limits Total Limits Single Family $60,000 $190,000 $250, Family $60,000 $190,000 $250,000 Other Residential $175,000 $75,000 $250,000 Non Residential $175,000 $325,000 $500,000 Contents Basic Limits Additional Limits Total Limits Residential $25,000 $75,000 $100,000 Non Residential $150,000 $350,000 $500,000 33

34 Residential Condominium Building Association Policy Limits Maximum limit is equal to $250,000 x Number of Units. If the value of each unit is valued at less the than $250,000, then the maximum limit would be the actual replacement cost value of unit x number of units. Only contents owned by the association are eligible for coverage. 34

35 Lack of Compliance Delay in Financial Closings Refinance/Sale of a property Lenders cannot facilitate a closing without a NFIP secured Evidence of Coverage consists of: Providing a NFIP Declaration Page Applications Summary Proving a bound policy Lenders are subject to strict fines and penalties should they close knowing the property is located within a SFHA Post closing: If NFIP is NOT renewed; Lender may force place NFIP coverage at the full expense of the property owner 35

36 Letters of Map Change Letter of Map Change (LOMC) is a general term used to refer to the several types of revisions and amendments to FEMA maps that can be accomplished by letter. They include: Letter of Map Amendment (LOMA) Letter of Map Revision (LOMR) and Letter of Map Revision based on Fill (LOMR-F) 36

37 Opportunities for a Letter of Map Change Property has been incorrectly mapped as being in the floodplain, but is actually on natural high ground above the base flood elevation (Letter of Map Amendment (LOMA) When the floodplain has been elevated above the Base Flood Elevation by placement of fill. (LOMR-F) The implementation of physical measures that affect the hydraulic characteristics of a flooding source resulting in the modification of the existing regulatory floodway (Letter of Map Revision (LOMR) 37

38 Create a formidable team-the NFIP Team! Engineer who is specialized in Elevation Certificate specific to NFIP Insurance Broker/Insurance Carrier Placing NFIP is their primary business Readily Provides Engineer Contact(s) across your portfolio Ability to place NFIP quickly and upon payment, can provide Declaration Page showing proof of coverage immediately 38

39 Create a formidable team-the NFIP Team! (Continued) Mapping Program (Timing is critical) Immediately provides FEMA SFHA Designation Plan quickly and accordingly Instruct your internal and external teams with confidence Communicate Findings to Internal Team Finance Closings New Construction 39

40 New Construction Design and Construction Plans Know the SFHA FEMA Designation Modify plans to move the property out of the SFHA Professional Consultants (through the local community) Apply for a Letter of Map Change LOMC After construction Very Costly Time Consuming Federally mandated to continue to purchase NFIP until LOMC is approved 40

41 Additional Questions? Greg Bates Managing Consultant Global Risk Consultants (770) Frank Francone Manager: Insurance & Risk Services General Growth Properties (312)