Lloyd's of London meetings on flood insurance for Carova Beach

Many of you know that I recently was asked to go and speak with a number of syndicates at the Lloyd's of London market in the UK. The sole purpose of my being there was to offer full market perspective to the underwriters about how CBRS flood insurance, calculated risk, and current lending and market conditions are interacting in the 4WD Area of the Outer Banks. It is no secret that flood insurance can be rather expensive in certain flood zones of a 'COBRA' area and obtaining coverage essentially forces you to purchase a flood policy through Lloyd's. To date, policy premiums have essentially been designed to have a minimum base premium price. From this base price, the premium gets more expensive if you have certain enclosures, less desirable elevations, etc...

I have always lobbied hard for the fact that there needs to be an "average" premium price for the "typical" home constructed in the 4WD area. From this sort of average standard, homeowners could then be rewarded or penalized with their premiums depending on factors such as elevation, preventative construction standards, groundfloor enclosures, proximity to the ocean, frontal dunes, etc... This method would allow a more accurate assessment of the property and thus a more accurate premium rate.

We further contested that rates should take into consideration all of the factors listed above and more when providing a quote. Currently the underwriters only use an elevation certificate with their application. They have no indication for such things as how far the water is (they assume the worst case scenario) or what kind of construction methods were used.

The underwriters of certain syndicates welcomed the idea of additional data and indicated that significant consideration would be given if they got a better sense of what they were quoting. I have sent a test case to see what they will say.

The last front of the appeal came in the form of deductible options. Currently most syndicates require a $50K or $25K deductible. Some lenders are not keen on the deductible amount being that high and won't quote reasonable rates or even quote rates at all. The underwriters seemed willing to allow us to design a flood policy that would allow some ala carte options such as choosing the deductible amount (ie $12.5K, 25K, 50K), coverage options/restrictions, etc... I was very encouraged by the meetings and their willingness to let us tweak some policies to give homeowners needing the flood insurance some options.

With all of that, we should be able to have some flood programs in place by mid-July that should be significantly more accurate and less expensive. Obviously the best rates will be for those without the enclosures on the groundfloor, the ones with good elevations above base flood, good dunes, etc... I would argue that is the way it should be. With current construction standards in place for coastal areas, new construction will inevitably offer some of the best premiums available.

Stay Tuned!

Senate Budget Proposal Allocates Funds For Bridge

It seems there is quite a bit of momentum for the Mid-County Bridge nowadays. A recent report shows a healthy amount of private investors lining up for th project and now the "public" portion of this project has allocated funds in the State Budget. Below is the full article from the Daily Advance:


By Zac Goldstein
Staff Writer
Daily Advance

Thursday, June 19, 2008

The budget proposed by the state Senate on Tuesday includes $15 million per year for the mid-Currituck Bridge.

The proposed two-lane, seven mile bridge would link Currituck's mainland near Aydlett with the Outer Banks south of Corolla across the Currituck Sound. The bridge has an estimated price tag of nearly $460 million and is set to open in 2013.

Partial funding for the bridge comes from a provision in the Senate budget which allows money from the Highway Trust Fund to go to the North Carolina Turnpike Authority for construction of toll roads. Of the $64 million appropriated annually from the Highway Trust Fund, $15 million will go to debt servicing and other financing expenses for the bridge over 39 years.

With costs factored in, about $198 million will go toward the bridge, according to the Turnpike Authority.

"After many years of hard work, the Mid-Currituck Bridge is coming closer to being built to benefit the residents and visitors of the northern Outer Banks," state Sen. Marc Basnight, D-Dare, said in a release.

Basnight, an early supporter of the bridge, said the budget provision would allow the bridge to be built with environmentally friendly features such as a pedestrian walkway and a bike path.

The budget, including the funding provision, has yet to be voted on by the full Senate. Even if it is adopted, the bridge will remain a public-private partnership with private investors picking up the remainder of the bridge's cost. The Turnpike Authority is currently soliciting qualifications from investors and contractor to design, build and finance the project.

While a toll for the bridge has yet to be determined, the Turnpike Authority had proposed $12 for a round trip over 39 years in order to pay back investors. According to the Turnpike Authority, the estimated toll amount will not be affected by the budget provision as the toll amount was calculated with the state funding in mind.

When complete, the bridge is expected to relieve congestion on the Wright Memorial Bridge which links Currituck and Dare counties.