CEDAR RAPIDS — Recent catastrophic disasters such as hurricanes Harvey, Irma and Maria have sent flood insurance costs soaring around the nation, stretching the budget for flood-prone cities such as Cedar Rapids.
The city faced a 24 percent, one-year jump worth about $200,000 during negotiations last fall. But its insurance policy manager, TrueNorth of Cedar Rapids, negotiated the rate down to 8 percent at the last minute.
“We were in a tough spot,” said Matt Evans, a risk management specialist for TrueNorth. “We pushed and negotiated with the renewal carriers really hard and levered on what could have happened had Cedar Rapids not acted quickly to protect themselves the way they did. ... We were able to get the increase below 10 percent, which we considered a win.”
Cedar Rapids agreed to a one-year policy for $1.4 million, down from the $1.6 million authorized in November by the City Council — but still up 8 percent from last year’s $1.3 million premium.
The new policy, which covers Dec. 1, 2017, to Dec. 1, 2018, provides the city $100 million in excess flood insurance per occurrence, covering $820 million worth of city property value.
The deductible is $250,000 per flood occurrence, or $100,000 for other major losses such as from earth movement. The policy also covers reasonable and necessary costs for temporary protection to preserve insured property in the event of real-time or immediately impending loss or damage.
The maximum value of the policy is $500 million for the year.
Cedar Rapids is required to carry at least $150 million worth of flood insurance, which is the amount of Federal Emergency Management Agency dollars received to restore city buildings damaged by the 2008 flood. Additional coverage comes through the National Flood Insurance Program.
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Shifting the portfolio to rely less on a carrier facing heavy claims from the 2017 disasters helped get the rate down as did lowering individual deductibles and switching from a per-building deductible to a blanket deductible, Evans said.
Perhaps more so, lessons learned from the 2008 flood, the response plan developed after it and the quick and successful implementation of the plan during the 2016 flood demonstrated the city and its leaders could minimize losses, he said.
Other cities Evans worked with that have experienced floods and hurricanes in the recent past saw increases well above 20 percent, he said.
The city of Davenport, which has flood insurance on 19 properties, is experiencing premium increases of 17.7 percent among properties renewed for fiscal 2018, said Brandon Wright, chief financial officer and assistant city administrator.
Last year, the nation sustained $306 billion in damages from 16 national disasters, led by Hurricanes Harvey, Irma and Maria, according to a National Oceanic and Atmospheric Administration report this month. That ranks 2017 as by far the most costly year on record for damages from natural disasters, ahead of the $214.8 billion sustained in 2005, which saw Hurricane Katrina.
Evans cited a report by Willis Towers Watson, a global advisory firm specializing in risk, that predicts rate increases are coming:
• 25 percent for commercial properties in areas that experienced recent catastrophic losses, such as Houston or Miami.
• 10 to 20 percent for commercial properties in an area that has experienced catastrophic losses but not recently, such as Cedar Rapids.
• 5 percent for commercial properties in all other locations.
“I would anticipate rates going up with upcoming renewals,” Evans said.
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Cedar Rapids settled its insurance claims from the 2016 flood for $500,000 from private insurers and $212,000 through the National Flood Insurance Program, according to city officials. The city did not disclose how much initially was claimed.
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