Aon Offers Option to Reinstate Flood Limits

Aon Risk Solutions is now providing a—solution—for businesses affected by flooding caused by Superstorm Sandy.

The global risk management business of Aon has launched “Flood Secure," backed by Lloyd’s of London, to replenish a company’s coverage for flood risk—coverage that may have been exhausted, or eaten away at, by Superstorm Sandy.

“This is a short-term solution until [the company’s] program renews, but we think it is a valuable service,” says Rick Miller, chief broking officer at Aon Risk Solutions’ U.S. Property Practice.

Coverage for the perils of flood and earthquake in more than 99 percent of policies, says Miller, are each aggregated—there’s a limit to how much coverage a company has. And these limits are different for flood and “high-hazard” flood.

For argument’s sake, a business might have $100 million in coverage for all other perils and $5 million for flood because it’s in a high-hazard flood zone. A business like this one affected by Sandy may have reached its flood coverage limit, or it has been impaired.

“This is why we wanted to roll out this option as quickly as possible,” Miller says.

Flood Secure reinstates this limit to make sure the business has coverage for the rest of the policy term—which are typically up within the first quarter of next year, since “No one wants to be in the market doing a renewal during the hurricane season,” says Miller.

Coverage—priced on a pro-rata basis—will match existing policy wording and immediately reinstate the flood limit, including in high-hazard zones, for up to $25 million for any one occurrence. Additional limits are also available.

Miller says Aon has a firsthand perspective of the damage caused by flooding from Sandy because its offices in lower Manhattan remain flooded and could be closed for several weeks. It has a business continuity plan in place to keep providing service to clients.

“Multiply what has happen to us, hundreds of times over, to our clients,” Miller says. “Losses can be pretty sizable from flood and some business might be left bare [without flood coverage] for the rest of the policy term.”

From an underwriting perspective, while it is true that another significant flooding event will not be repeated, storms like the nor’easter that followed Superstorm Sandy are wildcards, says Miller, who adds that he thinks Flood Secure would still be offered even if a Sandy-like event occurred in the middle of the hurricane season, rather than the very end.

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