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What Property Insurers Can Learn From Life Insurers – Part II

When customers are informed on the issues that can impact their flood risk, they are better positioned to manage the risk and avoid unanticipated large losses.
By: | March 1, 2018 • 4 min read

Part II in a Series: Lessons for Flood Risk Management
(Read Part I here)

A life insurer is considering policies for two men, both 35 years old and similarly overweight based on standard height and weight charts. Upon initial assessment, they present similar risk, meriting similar premiums. But as clinical data comes in, it becomes clear that while they weigh about the same, one man is an athlete with significant muscle mass and low cholesterol; the other carries more weight around his mid-section and has high cholesterol, making him a much greater risk. The two policies now carry significantly different premiums.  

Now consider two inland flood underwriters assessing two similar looking multi-story structures. Common practice will typically examine (1) where each building sits on a FEMA flood map (which categorizes wide swaths of land based on flood hazard) and (2) what, if any, past flood losses the building has seen. In this case both buildings are categorized as being in Zone “X” by FEMA, and both have little in the way of past losses.

If the property underwriter stops there, the risks appear very much the same. But much of the story will remain untold. As with the life insurance underwriting scenario, more relevant data specific to the buildings can create pivotal differentiation between risks and reduce surprises when the flood event occurs.

Flood Zone ≠ Flood Risk

Two buildings may fall into the same large flood zone, but could react quite differently in a flood, resulting in markedly different losses and recovery times.  
Photo credit: Julie Dermansky

Traditional flood models measure the potential flood depth (for each return period) at a building’s location relative to its ground elevation. However, the elevation level of a building’s finished first floor can vary significantly from the underlying ground level. This distinction is important in determining how much flooding could be expected in a particular building and can make two structures in the same large flood zone markedly different flood risks.

Additionally, what’s inside the building – and where – matters too.  One building may have a basement, while another may not. One may house critical mechanical, electrical, and plumbing (MEP) systems in the basement. The other may house these systems on higher floors.  All else being similar between the two buildings, the one with MEP systems on higher floors will likely fare much better in a flooding event.

Akshay Gupta, Berkshire Hathaway Specialty Insurance

Hurricane Sandy underscored the massive damage, particularly time element losses, that can result when floodwaters, and more so saltwater, swamp MEP systems. Major city skyscrapers were taken out of commission for months in some cases due to basement and ground floor flooding that would have been relatively inconsequential – had it not been for the MEP systems housed there.

More recently, when Hurricane Harvey dropped more than 40 inches of rainfall in Houston, many commercial assets suffered significant loss, primarily business interruption, due to flooding of underground parking lots and basements. One particular asset was spared major structural damage, but floodwaters flowed into its underground parking lot and the basement — which housed mechanical and electrical equipment. Despite dodging major structural damage, the facility is not expected to resume normal operations until nearly a year after the event – a costly interruption that would have been greatly minimized if critical systems were above grade.

While elevating the habitable space for an entire structure can minimize potential damages, such a move is costly for many existing commercial buildings. It is, however, observed at industrial facilities where critical assets, such as MCCs, can be entirely elevated. Moving critical systems and higher value items from a lower level floor to a higher one is a more economical way to mitigate potential flood damage and help ensure business continuity for conventional commercial buildings.

Awareness = Avoidance

Sanjay Godhwani, Berkshire Hathaway Specialty Insurance

At BHSI, we believe that when customers are informed on the issues that can impact inland (or hurricane induced) flood exposure, they are better positioned to manage the risk and avoid unanticipated large losses.  When we work closely with our customers to assess flood risks, they can be confident that they are receiving the best possible pricing and limits for their particular exposure.

Our flood insurance pricing algorithm is built to differentiate flood risk based on how high a building’s finished floor is relative to the adjacent ground (i.e., bare ground level versus finished floor level.) We always inquire whether a location has a basement; the answer can result in a significantly different premium for a customer. We also differentiate flood risks by examining each building’s floor-by-floor TIV distribution.  This allows us to give credit (or premium discounts) to buildings that have critical systems located on higher floors.

It’s all part of our commitment to help customers mitigate their flood losses and ensure that they secure the right flood coverage for their risk, at the right price, year after year.

To learn more, visit https://bhspecialty.com/.

The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.


This article was produced by Berkshire Hathaway Specialty Insurance and not the Risk & Insurance® editorial team.

Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, surety, travel, programs, medical stop loss and homeowners insurance.

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Janet Sheiner, VP of risk management and real estate at AMN Healthcare Services Inc., sees innovation as an answer to fast-evolving and emerging risks.
By: | March 5, 2018 • 4 min read

R&I: What was your first job?

As a kid, bagging groceries. My first job out of school, part-time temp secretary.

R&I: How did you come to work in risk management?

Risk management picks you; you don’t necessarily pick it. I came into it from a regulatory compliance angle. There’s a natural evolution because a lot of your compliance activities also have the effect of managing your risk.

R&I: What is the risk management community doing right?


There’s much benefit to grounding strategic planning in an ERM framework. That’s a great innovation in the industry, to have more emphasis on ERM. I also think that risk management thought leaders are casting themselves more as enablers of business, not deterrents, a move in the right direction.

R&I: What could the risk management community be doing a better job of?

Justified or not, risk management functions are often viewed as the “Department of No.” We’ve worked hard to cultivate a reputation as the “Department of Maybe,” so partners across the organization see us as business enablers. That reputation has meant entertaining some pretty crazy ideas, but our willingness to try and find a way to “yes” tempered with good risk management has made all the difference.

Janet Sheiner, VP, Risk Management & Real Estate, AMN Healthcare Services Inc.

R&I: What was the best location and year for the RIMS conference and why?

San Diego, of course!  America’s Finest City has the infrastructure, Convention Center, hotels, airport and public transportation — plus you can’t beat our great weather! The restaurant scene is great, not to mention those beautiful coastal views.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

The emergence of risk management as a distinct profession, with four-year degree programs and specific academic curriculum. Now I have people on my team who say their goal is to be a risk manager. I said before that risk management picks you, but we’re getting to a point where people pick it.

R&I: What emerging commercial risk most concerns you?


The commercial insurance market’s ability to innovate to meet customer demand. Businesses need to innovate to stay relevant, and the commercial market needs to innovate with us.  Carriers have to be willing to take on more risk and potentially take a loss to meet the unique and evolving risks companies are facing.

R&I: Of which insurance carrier do you have the highest opinion?

Beazley. They have been an outstanding partner to AMN. They are responsive, flexible and reasonable.  They have evolved with us. They have an appreciation for risk management practices we’ve organically woven into our business, and by extension, this makes them more comfortable with taking on new risks with us.

R&I: Are you optimistic or pessimistic about the U.S. health care industry and why?

I am very optimistic about the health care industry. We have an aging population with burgeoning health care needs, coupled with a decreasing supply of health care providers — that means we have to get smarter about how we manage health care. There’s a lot of opportunity for thought leaders to fill that gap.

R&I: Who is your mentor and why?

Professionally, AMN Healthcare General Counsel, Denise Jackson, has enabled me to do the best work I’ve ever done, and better than I thought I could do.  Personally, my husband Andrew, a second-grade teacher, who has a way of putting things into a human perspective.

R&I: What have you accomplished that you are proudest of?

In my early 20s, I set a goal for the “corner office.” I achieved that when I became vice president.  I received a ‘Values in Practice’ award for trust at AMN. The nomination came from team members I work with every day, and I was incredibly humbled and honored.

R&I: What is your favorite book or movie?

The noir genre, so anything by Raymond Chandler in books. For movies,  “Double Indemnity,” the 1944 Billy Wilder classic, with insurance at the heart of it!

R&I: What is your favorite drink?


Clean water. Check out Water.org for how to help people enjoy clean, safe water.

R&I: What’s the best restaurant at which you’ve eaten?

Liqun Roast Duck Restaurant in Beijing.

R&I: What is the most unusual/interesting place you have ever visited?

China. See favorite restaurant above. This restaurant had been open for 100 years in that location. It didn’t exactly have an “A” rating, and it was probably not a place most risk managers would go to.

R&I: What is the riskiest activity you ever engaged in?

Eating that duck at Liqun!

R&I: If the world has a modern hero, who is it and why?

Dr. Seuss who, in response to a 1954 report in Life magazine, worked to reduce illiteracy among school children by making children’s books more interesting. His work continues to educate and entertain children worldwide.

R&I: What do your friends and family think you do?

They’re not really sure!

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]