Parker, Smith & Feek (PS&F) opened a dialogue with a large West Coast manufacturer whose principal plant is located just outside a high-hazard flood zone. The manufacturer faced several paramount flood issues.
First, the Army Corps of Engineers recommended decertification of the levies near the plant. This would leave it in a high-hazard zone. Second, the Army Corps of Engineers found breeches in the dam above the plant, further increasing the anxiety of many underwriters.
Despite spending several hundred thousand dollars to control the risk, coverage was still fragmented and expensive. The company had two towers of coverage, two different effective dates, placed with five different insurance companies over eight different policies. The fragmented structure led to gaps and overlaps of coverage as well as administrative nightmares. To make matters worse, a careful review of their property exposures revealed that they were woefully underinsured.
PS&F engaged its risk-control engineer, Mike Woltersdorf, on the project. After meeting with the client, Woltersdorf developed loss-control reports that explained the exposures and the controls the client had implemented to help mitigate a flood loss. These included flood-emergency response plans, construction of berms, and back-flow valves for water and sewer supplies. Woltersdorf also mapped the flood zones and utilized reports from outside consultants to better define the exposure as well as the flood levels that would be required before the client's location would be affected.
PS&F used the reports as well as meetings with underwriters and the client to create greater understanding of the exposures.
In the end, PS&F was able to consolidate the insured's program to one tower of insurance with a common expiration and a single effective date. It increased values by more than 60 percent, spread larger flood and earthquake limits to all of their buildings, vastly increased their coverage for ordinary payroll—and were still able to lower the insured's property premiums.
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