Flood Resiliency

FEMA’s Revisions May Result in Less Flood Protection

FEMA's recent flood map exempted about 60,000 homeowners in New Orleans from required NFIP coverage. Will private insurers step in to offer protection?
By: | October 18, 2016 • 4 min read

No one is more impressed than Susan Williams by the shoring up of 50 levees and rehabilitation of flood walls and pumping stations overwhelmed when Katrina struck New Orleans hit in 2005.

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Nor is CoreLogic’s content strategist surprised by the result: FEMA map revisions that removed nearly 60,000 homes from the Special Flood Hazard Areas (SFHA) on Sept. 30, exempting their owners from mandatory compliance with NFIP flood insurance requirements.

But Williams’s buoyant mood comes with a caveat.

“If the lender only follows the government guidelines, homeowners would not be required to obtain flood insurance. But just because they’re not in that flood hazard area anymore because of the new mapping doesn’t mean the flood risk has gone away.”

John Elbl, vice president, AIR Worldwide

John Elbl, vice president, AIR Worldwide

John Elbl, vice president at AIR Worldwide, agreed with that assessment, fearing individuals still at great risk may elect to drop flood coverage from their policies to save money in the short term.

“We’re hopeful private insurers will step in to help fill this protection gap by charging actuarially sound rates and providing policyholders with more comprehensive coverage options.”

The problem may not be private insurers, however, but the banks. A year ago, Elbl noted the opportunities for insurance industry to provide alternative coverage to the NFIP ran into complications, not the least of which was reluctance on the part of banks to accept policy wording that wasn’t identical to the NFIP’s.

That uncertainty, he said at the time, “restricts the ability of the customer to choose private coverage.”

Today, Elbl said insurers considering entering the market to compete with the NFIP are pinning their hopes on expected NFIP rate increases driven by the program’s $24 billion deficit and its inability to offer more than limited coverage for policy holders.

“NFIP policies do not cover basements, do not include payouts based on loss of use of a property, and only pay actual cash value, less depreciation, as opposed to standard HO3 policies which pay out full replacement costs.”

Another bright sign, added Williams, are for properties in areas of greatest risk and who pay the highest rates.

“The cost of flood insurance should go down and hopefully that will in turn make people more interested in getting coverage. That in turn adds to the resilience of the area.”

Overly Optimistic Message

Dean Basse couldn’t disagree more. The general manager at Dan Burghardt Insurance in New Orleans said an overly optimistic message to cash-starved homeowners about the city’s improved levee system will disincentivize them from obtaining flood insurance when they’re no longer required by federal law to do so.

“We can’t give away a policy unless they’re forced to buy it,” says Basse. “They won’t buy flood insurance voluntarily even at the PRP rate.”

Moreover, the infrastructure rehab along Louisiana’s 300-mile coast line, said Basse, may not be the final answer in flood protection.

“They spent a billion dollars to build this giant rock wall and someone forgot that it’s still built on mud. Our mud is not known for being the most solid thing in the world. And it’s sinking.”

Jackie Noto, model product manager, Risk Management Solutions

Jackie Noto, model product manager, Risk Management Solutions

It gets worse, Basse added, the next time another major catastrophe hits New Orleans like Katrina, like Betsy in 1965 or the “thousand-year rain” that dropped onto Louisiana this year.

Jackie Noto’s concerns are more for the NFIP itself, which was intended, the model product manager at Risk Management Solutions said, to support the original charter and objectives of the Flood Protection Act.

Unfortunately, said Noto, “the NFIP is 50 years old and its methodologies and approach haven’t aged gracefully.”

What the NFIP must do, she said, is “move away from this `in or out’ mentality. What matters is the depth, severity and frequency of flood risk for our entire area.”

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“That’s also been proven in the recent Louisiana flooding as well where buildings that were damaged weren’t considered on plain and still aren’t as recently as FEMA’S map updates. That’s definitely not an adequate approach.”

To those insurers who believe there is no such thing as a bad risk, only a bad price, Noto said their business actually improves the more they are able to differentiate risk.

“When they have information on the level of protection and probability of flood defense failure, that allows them to price risk to reflect the appropriate risk itself.”

Unfortunately, Noto added, “that’s not something the insurance industry is used to.”

David Godkin is a freelance magazine writer based in Toronto. He can be reached at [email protected]

More from Risk & Insurance

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R&I Profile

Achieving Balance

XL Catlin’s Denise Balan stays calm and focused when faced with crisis.
By: | January 10, 2018 • 6 min read

In the high-stress scenario of kidnap or ransom, the first image that comes to mind isn’t necessarily a yoga mat — at least, not for most.

But Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin, who practices yoga every day, would swear by it.

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“I looked at these opposing aspects of my life,” she said. “Yoga is about focus, balance, clarity of intent. In a moment of stress, how do you respond? The more clarity and calmness you maintain, the better positioned you are to provide assistance in moments of crisis.

“Nobody wants to be speaking to a frenetic person when either dealing with a dangerous situation or planning for prevention of a situation,” she added.

“There’s a poem by [Rudyard] Kipling on that,” added Balan’s colleague Ben Tucker. “What it boils down to is: If you can remain calm, you can manage through a crisis a lot better.”

Tucker, who works side by side with Balan as head of U.S. terrorism and political violence, XL Catlin, has seen how yoga influences his colleague.

“The way Denise interacts with stakeholders in this process — she is very professional and calm in the approach she takes.”

Yin and Yang

Sometimes seemingly opposite or contrary forces may actually be complementary and interconnected. In Balan’s life, yoga and K&R have become her yin and yang.

She entered the insurance world after earning a juris doctor degree and practicing law for a few years. The switch came, she said, when Balan realized she wasn’t enjoying her time as a commercial litigator.

Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin

In her new role, she was able to use her legal background to manage litigation at AIG, where her transition from law to insurance took place. She started her insurance career in the environmental sector.

In a chance meeting in 2007, Balan met with crisis management underwriters who told her about kidnap and ransom products.

She was hooked.

Because of her background in yoga, Balan liked the crisis management side of the job. Being able to bring the calmness and clearness of intent she practiced during yoga into assisting clients in planning for crisis management piqued her interest.

She then joined XL Catlin in July 2013, where she built the K&R team.

As she became more immersed in her field, Balan began to notice something: The principles she learned in yoga were the same principles ex-military and ex-law enforcement practiced when called to a K&R-related crisis.

She said, “They have a warrior mentality — focus, purpose, strength and logic — and I would say yoga is quite similar in discipline.”

“K&R responders have a warrior mentality — focus, purpose, strength and logic — and I would say yoga is quite similar in discipline.” — Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin

Many understand yoga to be, in itself, one type of meditation, but yoga actually encompasses a group of physical, mental and spiritual practices. Each is a discipline. Some forms of yoga focus on movement and breathing, others focus on posture and technique. Some yoga is meant to relax the mind and create a sense of calmness; other yoga types make participants sweat.

After having her second child and working full-time, Balan wanted to find something physical and relaxing for herself; a friend suggested yoga. During her first lesson, Balan said she was enamored with it.

“I felt like I’d done it all my life.”

She dove into the philosophy of yoga, adopting the practice into her daily routine. Every morning, whether Balan is in her Long Island home or on a business trip, she pulls out her yoga mat to practice.

“I always travel with my mat,” she said. “Daily practice is the simplest form of connection to routine to maintain my balance — physically and mentally.”

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She said the strangest place she has ever practiced was in Lisbon. She was on a very narrow balcony with a bird feeder swarming with sparrows overhead.

After years of studying and practicing, Balan is considered a yogi — someone who is highly proficient in yoga. She attends annual retreats with her yoga group, where she is able to rejuvenate, ready to tackle any K&R event when she returns.

In 2016, Balan visited Tuscany, Italy, where she learned the practice of yoga nidra, a very deep form of meditation. It’s described as the “going-to-sleep stage” — a type of yoga that brings participants to a state of consciousness between waking and sleeping.

“It awakens a different part of your brain,” Balan commented. “Orally describing it doesn’t quite do it justice. One has to practice Nidra to fully understand the effect it has on your being.”

Keeping a level head during a crisis is key in their line of business, Tucker said. He can attest to the benefit of having a yogi on board.

“I’ve seen her run table-top exercises where there is this group of people in a room and they run an exercise, a simulation of a kidnap incident. Denise is very committed to what we’re doing,” said Tucker.

“She brings that energy. She doesn’t get flustered by much.”

Building a K&R Program

When Balan joined XL Catlin, she was tasked with creating the K&R team.

Balan during a retreat in Sicily, Italy, 2017

She spent time researching and analyzing what clients would want in their K&R coverage. What stuck out most to Balan was the fact that, in these situations, the decision to purchase kidnap and ransom cover is rarely made because of desire for reimbursement of money.

“I asked why people buy this type of coverage. The answer was for the security responders,” she said.

“These are the people who sit with the family. They’re similar to psychologists or priests,” Balan further explained. “Corporations can afford to pay ransom. They buy [K&R] because it gives them access to these trained and dedicated professionals who not only provide negotiation advice, but actually sit with a victim’s family, engaging deep levels of emotional investment.”

“I’ve learned to appreciate all moments in life — one at a time. The ability to think clearly and calmly guides my work, my practice and my personal life.” — Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin

Balan described these responders as people having total clarity of purpose, setting their intentions to resolve a crisis — a practice at the very heart of yoga. She knew XL Catlin’s new kidnap program would put stock in their responders.

“I’ve worked closely with the responders to better understand what they can do for our clientele. These are the people who run into danger — warrior hearts married to dedication to our clients’ best interests.”

But K&R is more than fast-paced crisis and quick thinking; Balan also spent a good deal of time writing the K&R form and getting the company’s resources in order. This was a huge task to tackle when creating the program from the ground up.

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“A lot of my day-to-day is speaking with brokers and finding ways to enhance our product,” she said.

After a few months, she was able to hire the company’s first K&R underwriter. From there, the program has grown. It’s left her feeling professionally rewarded.

“People don’t often get that opportunity to build something up from scratch,” she said. “It’s been an amazing experience — rewarding and fun.”

“She brings groups of people together,” said Tucker. “She’s created a positive environment.”

Balan’s yogi nature extends beyond the office walls, too. Her pride and joy, she said, are her kids. And while it may seem like two large parts of her life are opposite in nature, Balan’s achieved balance through her passions.

“[Yoga] has given me the ability to see beyond only one aspect of any situation” she said. “I’ve learned to appreciate all moments in life — one at a time. The ability to think clearly and calmly guides my work, my practice and my personal life.” &

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]