ZURICH (Reuters) - Swiss Re and Security First Insurance have teamed up to offer water damage insurance to homeowners in Florida using a new modeling system that could reshape the private market for insuring against floods, the Swiss reinsurer said on Monday.
The joint venture lets residents of the southern U.S. state include water damage, including flood coverage, in their homeowners policy. Ratings are based on Swiss Re’s proprietary flood model, it said.
“The Swiss Re model generates a premium that is based on the unique characteristics of the exposure such as location of the structure, type of construction and insured value, rather than relying on rating tables which are less accurate,” it said.
Security First policyholders could be among the first to apply for enhanced coverage with a single deductible for wind and flood damage.
“This innovative policy is proof that flood is insurable in the private market and we believe it can be replicated throughout the U.S. to help solve a profound underinsurance issue,” said Keith Wolfe, Swiss Re’s U.S. president for property and casualty insurance.
Hurricanes Harvey and Irma clobbered the United States last year, increasing property damage. Flooding typically causes damage of around $15 billion a year in the U.S., of which only $5 billion is insured, a Swiss Re statement said.
Security First has started offering the optional flood and water backup coverage to customers and will handle distribution, administration and claims servicing.
U.S. Congress has been extending on a stopgap basis the federal flood insurance program after legislation that would drastically overhaul the system stalled in the Senate after passage in the House of Representatives.
Supporters of the overhaul say it would improve the amount of choice in the marketplace and stabilize rates. Critics have voiced concern it could result in drastic price increases for some flood-prone areas.
Reporting by Michael Shields; Editing by Kirsten Donovan