A surge of development in flood plains has insurance companies casting a nervous eye at the levees that protect much of the new construction.
The companies, which underwrite property and casualty insurance, are worried not only about the risk to homes and businesses behind new levees, but also about the potential failure of older levee systems.
"Levees generally have a 50-year design life, and most of them were built in the 1940s," said Jim Russell, director of the Flood Risk Education Alliance, a group set up last year to study the issue and build public awareness.
Last October, a group of insurers, levee managers and government officials met at the Federal Emergency Management Administration's offices in Chicago for a two-day session on the state of the nation's levees.
The meeting was initiated by one company that paid out millions in claims after the Monarch Levee protecting the Chesterfield Valley failed in the Flood of 1993, inundating nearly 300 businesses.
"There was unanimity among all attendees that levees are potentially a very serious problem," Russell said.
RELATED LINKS:
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The sessions led to the creation of the Flood Risk Education Alliance, which operates under the auspices of the Institute of Business and Home Safety in Tampa, Fla.
Homeowners and businesses can buy insurance through the federal flood insurance program, but coverage is capped at $500,000 for a building and $500,000 for its contents.
Businesses that need more protection buy additional coverage privately.
Many people who have homes and businesses behind levees do not even have flood insurance, because it is not required, Russell said.
Some insurers might also have underestimated the risk when they wrote policies for customers in those areas, said Bob Madeiros, an insurance risk executive with Royal & SunAlliance, a leading property and casualty company.
"Most of the flood information we get nowadays comes from digitized maps," Madeiros said. "They show numeric values, not levees."
Those numeric values, which reflect flood risk, put land behind levees on the same plane as much more elevated ground.
"You might as well be on top of a mountain," Madeiros said.
Rising flood heights also make it difficult to assess the integrity of older levees, Madeiros said.
Insurers are keeping a careful watch on the continuing investment in the Chesterfield Valley, where the number of jobs and commercial space far exceed their 1993 levels.
The industry also is concerned about development in the flood plains around Sacramento, Calif., where some 80 percent of the metropolitan area is protected by levees.
A New Year's storm there in 1997 caused a levee break near Yuba City. The flooding killed three people and caused $1.8 billion in damage.
The levee system in the Sacramento Valley failed twice before that, in 1955 and 1986. The flooding in 1955 killed 38 people.
The consequences for businesses in the flooded areas can be equally severe.
Between 20 percent and 25 percent of all businesses that are closed by a flood or some other catastrophe never reopen, Russell said, citing research by the Insurance Information Institute.
Reporter Christopher Carey:
E-mail: ccarey@post-dispatch.com
Phone: 314-340-8291
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