2007-01-10 CC - Laserfiche WebLink

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Code C buildings - i.e., buildings for which LMCIT provides no flood coverage - make up about 45% of the total value ofLMCIT members' buildings. 65% ofLMCIT member cities have at least some buildings classified as Code C. Again - it's important to remember not every flood is a "disaster" for which FEMA or state assistance would be available. You cannot assume that if flood damage occurs federal or state disaster assistance will be available. It mayor may not be. How would the proposed LMCIT flood coverage program work? The concept the LMCIT Board has been considering would work like this: · All city buildings would automatically be covered for flood damage. The coverage would be at least as broad as what an NFIP flood insurance policy would provide. · The limit on each building would be the lesser of either the actual replacement cost value or $500,000 on the building, plus the lesser of either actual replacement cost or $500,000 on contents. This matches the maximum limit offered by NFIP. · The flood insurance would be paid for through a surcharge on the property premiums for buildings within the 500-year flood hazard area. For buildings outside the 500-year flood zone, premiums wouldn't change (or would change by at most no more than a percent or two). A flood insurance program is probably only workable if the coverage is automatic and mandatory. We don't believe it's feasible to offer flood coverage as an option because of the "adverse selection" problem that would create. How much would it cost? Our best estimate of the amount needed to make the proposedjlood insurance program work is in the range of 35% of the total property premiums on properties within the 500-year jlood plain. If the cost were spread as a flat premium surcharge against Code C properties we estimate the premium surcharge would be in the range of 30 to 40 percent of the current LMCIT property premiums on those buildings. Please note that no decision has been made on an actual rating system, and there are any number of possibilities for alternative rating structures. E.g., there might be different surcharges for properties inside and outside the 100-year flood zone; or since the maximum limits would be $500,000 building and $500,000 contents, it might be appropriate to use a higher surcharge applied only to the premium for the first $1 million of value on high- valued buildings; and so on. To help put the costs in context, here are a couple cost comparisons for some "typical" city buildings: