US mid-market companies unprepared for flood risk, warns Chubb

US mid-market companies are significantly unaware of and unprepared for the risks their businesses face from flooding, according to a new survey from Chubb. It revealed that around 85% of mid-market US companies (a majority between $10m and $1bn) mistakenly believe their property insurance covers some, all, or most types of flooding.

Chubb commissioned the survey of insurance brokers to gauge perceptions of businesses related to flooding risk. It said brokers are well positioned to understand their clients’ awareness of flood exposures and understanding of available insurance protections, as well as their familiarity with flood insurance and risk-mitigation measures.

More than half of brokers (56%) said organisations they support do not purchase flood insurance because they assume it is already included in their commercial property policy. A large majority of brokers (84%) report that most of their client base do not purchase any flood insurance.

“Flood risk is far more pervasive, with the increasing frequency and severity of extreme weather events,” said Louis Hobson, senior vice-president, North America flood insurance at Chubb North America. “This report shows that far too many companies are unknowingly uninsured against flood risks. It is incumbent on insurance carriers and brokers to educate the marketplace and ensure organisations understand the risks of flood and the protection available.”

Chubb noted that in the US, floods have cost taxpayers over $850bn since 2000, accounting for two-thirds of the cost of all natural disasters.

Chubb said the misconceptions and coverage gaps revealed by the survey show a broader misunderstanding on preventing and mitigating flood risk. More than two-thirds (69%) of brokers believe only a small minority of businesses know that flooding is the most common and costly natural disaster, while nearly half of brokers (45%) say their clients do not even request a quote for flood insurance coverage.

“These findings create a sense of urgency within the insurance industry to clarify coverage details so that commercial property owners are not surprised when they discover their flood losses are not covered by existing policies,” said Chubb. “Businesses may want to focus on building resilience into their properties and operations to ensure they are adequately prepared for the long term.”

It added: “Taken together, the survey results show a severe underestimation of the gravity of commercial flood risk, and underscore the urgent need for education around the severity and frequency of floods, even in traditionally low-risk areas.”