Flood zone finances: Insurance costs rising for coastal colleges
An ocean view may make campus tours scenic, but when it comes to flood insurance, coastal institutions will soon face a deluge of bills. Flood insurance subsidies for colleges and universities located in federally-designated flood zones ended on Oct. 1, when the Biggert Waters Act went into effect.
Premiums will increase by 25 percent each year until the “full risk rate” is reached. That rate will include the average claims payout and all administrative expenses. Institutional officials will need to work with insurance brokers to determine what that amount will be and budget accordingly, says Lisa Mets, vice president of Eckerd College in St. Petersburg, Fla.
“The rate of increase is too much too fast and needs to be examined closely,” Mets adds. Insurance premiums, which cover both buildings and the contents within the buildings, currently cost Eckerd $370,000 a year.
Mets is working with Florida legislators to try to slow down the increases. “I am hoping to form a coalition of colleges and universities so we can make our voices heard in Washington,” she says. Other proponents of delaying the increases by at least one year include Gov. Bobby Jindall (La.) and bill co-sponsor and former Congresswoman Maxine Waters (Calif.).
Introduced in November, the Homeowner Flood Insurance Affordability Act of 2013 bill would delay the increases by four years should it be passed by the end of 2013.
Areas along oceans, rivers, streams, and ponds are designated by a zone code that indicates level of flood risk. Buildings in Zone A areas, such as at Eckerd, have the highest risk of flooding, at one percent chance annually. Another shadow of uncertainty is FEMA’s plan to release newly drawn flood maps in the near future.
This makes it impossible for campus officials to budget for increased rates, Mets says. “Base flood elevation level is currently 12 feet. If the new maps say base flood elevation level is 14 feet, buildings that were previously OK could now require a higher rate.”
Other colleges stuck in a “wait and see” mode include Endicott College, located in Beverly, 20 miles north of Boston. Its flood insurance premiums are paid by Endicott’s physical plant budget, says Donna Couture, treasurer. “If our overall physical plant budget cannot absorb any additional costs, we will have to draw from our contingency budget.”
Leaders at any institution must be aware of what their federal flood insurance covers, says John Paul Sutrich, president of Andrew Robinson International, a risk management firm that advises Endicott. FEMA only provides $500,000 for damaged structures, he adds. If buildings and contents are worth more than that, it may be necessary to purchase coverage from for-profit insurers.
“Endicott carries extra insurance that covers a small amount of student property and the cost of moving students out of a flood-zone dorm in case of a flood,” Sutrich says. “There’s even coverage for the lost revenue that would occur if we were unable to house students in that dorm due to damage.”
Special care needs to be taken when selecting a for profit-insurer, Sutrich says. “Many of these companies will not cover flood zones, plus 500 feet beyond the flood zone.” Officials may think certain buildings are covered, and then receive a costly surprise when a claim is submitted after a disaster.