Catastrophe Insurance 2020: Snow, floods and acts of terrorism

Sharon Fisher//December 23, 2019

Catastrophe Insurance 2020: Snow, floods and acts of terrorism

Sharon Fisher//December 23, 2019

photo of flooding
Floods are increasingly a threat to Idaho businesses due to climate change. Photo courtesy of FEMA

Editor’s note: This is the second in a four-part series on business preparedness for the 2020s.  This article was updated on Dec. 22 to reflect President Donald Trump’s signing of the budget bill.

Back in the day, insurance was simple. You had car, house, life and business and you called it good.

But increasingly, insurance is getting more specialized. As more situations arise, insurance companies come up with more insurance to cover them. And new catastrophes are coming up all the time.

“Businesses in Idaho face a variety of risks and hazards and they come in all shapes and sizes,” said Jon Hanian, public-private partnerships program manager for the Idaho Office of Emergency Management, in an email message. “Those include natural events, like flooding, earthquakes, winter storms and wildfire, to man-made disasters like cyber attacks and active shooter events. Any one of these potential tragedies has the ability to seriously impact business. That impact is either magnified or lessened to the degree a business, the owner and his or her employees prepare and work together to mitigate these threats.”

Ironically, one of Idaho’s problems is that it doesn’t have disasters often enough to get people thinking about them, Hanian said.

“The challenge in Idaho is that we don’t have the kind of ‘battle rhythm’ that states in Tornado Alley, or people who live along the Gulf or East Coasts experience during periods of violent weather and hurricane season,” he said. “That is both a blessing and a curse because it creates a sense of complacency here when it comes to preparing for the worst. The challenge is to get businesses to start thinking about not just worst-case scenarios, but the kinds of events that can happen elsewhere that can create serious problems here we might not think about until it happens.”

Until 2017, for example, people might not have thought of ensuring that their business insurance covered situations like the collapse of roofs of onion sheds and grocery stores due to snow.

Terrorism insurance

Similarly, before 9/11, companies might not have thought of having terrorism insurance. But it now exists, as does the Terrorism Risk Insurance Act, which aims to make sure it continues to be available at an affordable price.

photo of emily baker
Emily Baker

“(TRIA) was created after 9/11 to prevent potential acts of terrorism from causing massive, long-term disruption to a city or state’s economy and has served as an unseen factor in keeping our economy stable and provided necessary coverage for businesses, especially developers and large construction operations,” said Emily Baker, executive director of the Idaho Coalition for Action on TRIA, in an email message. “Private insurers still provide terrorism insurance coverage.”

TRIA provides shared public and private compensation for insured losses resulting from acts of terrorism. It kicks in after a certain point, based on yearly increases – for example, after $200 million as of 2020.

TRIA also allows for a transitional period for private markets to stabilize, resume pricing of such insurance and build capacity to absorb any future losses, while preserving state insurance regulation and consumer protections, Baker added.

Without TRIA, insurers could decline to offer terrorism coverage, Baker said. And without private insurers, the federal government would be pressured to cover uninsured losses in case of an act of terrorism, she added.

The coalition launched in November to encourage extension of TRIA for the next seven years. Otherwise, it will expire on Dec. 31, 2020. Some 30 Idaho businesses and business organizations, including Idaho Power, St. Luke’s Health System and Boise State University, are members.

“Many of the events we all enjoy and love like the Snake River Stampede, the McCall Winter Carnival and the Lionel Hampton Jazz Festival in Moscow benefit from TRIA and the availability of affordable priced insurance policies,” Baker said.

The bill to extend TRIA passed in the House and Senate earlier this year. It was included in the 2020 omnibus spending bill, which passed both the House and Senate during the week of Dec. 16 and was signed by President Donald Trump on Dec. 21 to avoid a government shutdown.

Flood insurance

On a more mundane level, the Federal Emergency Management Agency (FEMA) is encouraging Idaho businesses to think about flood insurance before the spring thaw.

photo of scott van hoff
Scott Van Hoff

“In the past, we had commercials on late-night TV that nobody saw,” said Scott Van Hoff, regional flood insurance liaison for FEMA Region X, based in Bothell, Washington.

Now, the organization is using targeted marketing related to flood risk after events like a forest fire or as snowpack builds up, he said.

It’s an odd thing to say about a desert, but parts of Idaho are subject to floods, and the long-term trend is toward less snowpack and more rain, said Van Hoff, who previously worked for the Department of Water Resources as state floodplain coordinator.

Van Hoff joked that he spent seven years in Idaho trying to convince people not to build in high-risk areas.

“Water is attractive,” he said. “People consider it an amenity, particularly in a desert environment.”

But governments are limited in how much they can prohibit development in a particular area, Van Hoff said. Moreover, “in much of the state, building codes are still a foreign concept,” he said. And in a lot of places, restricting development is unpopular, he said.

“Saying ‘no’ to development is something they just don’t do very often.”