Munich Re’s U.S. arm sees growth potential in the private flood insurance market.

The German reinsurer is launching a personal lines inland flood insurance product targeted at giving more options to homeowners beyond the National Flood Insurance Program in low-to-moderate-hazard flood zones.

“It is a first step into the private flood insurance marketplace, and one we’re taking cautiously and deliberately,” Steve Levy, president of Munich Re America’s reinsurance division, said in prepared remarks.

Munich Re idea is to offer an inland flood coverage endorsement that can be attached to a consumer’s existing homeowner’s policy through a participating insurance carrier. Munich Re said it is already in discussions with prospective carriers and state regulatory officials in a bid to get started. For insurance carriers that chose to offer the endorsement, Hartford Steam Boiler Inspection and Insurance Company (owned by Munich Re) will provide full implementation services.

The carrier sees opportunity because most homeowners insurance policies do not cover flood. Typically, policyholders must purchase the coverage separately through the National Flood Insurance Program. But there is only a 1 percent estimated purchase rate for the add-on in low-to-moderate-hazard flood zones. With that low purchase rate in mind, Munich Re cites NFIP data that shows those areas account for more than 20 percent of NFIP claims, and one-third of Federal Disaster Assistance for flooding.

NFIP statistics cited by Munich Re show that flood is the most common natural disaster in the United States, and all 50 states have experienced floods or flash floods over the past five years. But many homeowners living outside of the Atlantic and Gulf coast areas do not have flood insurance coverage.

Levy said this new product is designed to address that underserved markets, mindful of increased flooding problems stemming from “more intense annual precipitation over the last decades.

“This product,” he said, “is an attractive alternative for non-coastal homeowners looking for competitively priced, lower-limit coverage to protect their homes and personal property.”
Source: Munich Re