PRODUCT: Commercial Inland Flood endorsement
COMPANY: Munich Reinsurance America
BEST RATING: A+ (Superior)
AVAILABILITY: A partner carrier must offer this white-label endorsement as part of its commercial package or business owners policy. Only then can appointed agents offer the endorsement.
FOCUS: Nearly 100% of commercial policyholders with a business income of less than $250,000 have no flood coverage, according to a recent survey from Munich Reinsurance America.
But flood is the No. 1 naturally occurring risk in terms of frequency in the U.S., according to FEMA, which reports that all 50 states have experienced floods or flash floods in the last five years.
Considering FEMA also found that nearly 40% of small businesses never reopen their doors after a disaster, flood is clearly a serious threat for small commercial clients, regardless of their location.
“The danger of flood has only increased for small businesses as weather patterns change faster than infrastructure can keep up,” says Sanjay Mehrotra, strategic products operations manager, Munich Re. “As business owners become more aware of the risk of flood, they are looking for affordable coverage.”
Munich Re responds with its new Commercial Inland Flood endorsement, which protects an insured’s building and contents (including business property in a basement), while also providing coverage for business interruption/extra expense and costs associated with moving property to safety or removing debris.
Munich Re launched a personal lines version of the endorsement back in 2015. “Munich Re is an active participant in the U.S. private flood market,” Mehrotra says. “We’re very interested in seeing more individuals and businesses get insurance coverage for flood events.”
COVERAGE DETAILS: Developed with substantial feedback from clients, agents, analysts and consultants, the product incorporates location-specific hazard information and state-of-the-art flood modeling science, resulting in “risk-appropriate pricing that will be attractive to the vast majority of policyholders,” Mehrotra says.
The flood model covers the entirety of the contiguous U.S. with a 10-meter grid resolution—a “level of detail not before possible,” Mehrotra points out. The flood hazard calculation incorporates both riverine (fluvial) and surface water (pluvial) flooding events and involves sophisticated hydrologic methodologies.
Coverage highlights include:
- Two limit options
- Scheduled: maximum limit per policy, per occurrence and in the aggregate of $250,000 building, $250,000 contents and $50,000 business income/extra expense
- Blanket: maximum limit per policy, per occurrence and in the aggregate of $250,000
- 1% minimum policy deductible when any location has a risk score of 7 or higher.
- Minimum insurance to value of 20% per location, with higher limits available upon special request
- Maximum of five locations per policy
- Loss settlement which follows the underlying policy
- No coinsurance provision
- 100% quota share treaty reinsurance on a continuous or multiyear basis
Endorsement wording is based on ISO commercial package policy flood language, and rates are based on filed ISO loss costs for commercial package policy flood.
UNDERWRITING: To quote, Munich Re requires the building’s address, value, contents value, business interruption/additional living expense value, limit and deductible.
Optional information that makes the quoting process more accurate includes the building’s construction type, number of stories, year built, presence of basement, first-floor elevation and square footage.
MINIMUM PREMIUM: Varies by risk score.
TARGET: Insurance carriers and their agents that focus on writing small commercial lines risks, carry an A.M. Best rating of B+ or better, and have an estimated commercial lines gross written premium above $5 million.
COVERAGE TERRITORY: U.S.
COVERAGE AVAILABILITY: All U.S. states except Florida and Hawaii.
CONTACT: Sanjay Mehrotra, strategic products operations manager; Munich Reinsurance America, 555 College Road East, Princeton, NJ.
Jacquelyn Connelly is IA senior editor.
