View this article online: https://www.insurancejournal.com/magazines/mag-ideaexchange/2007/05/21/80548.htm
Concrete houses sprouting up in southern Alabama, Mississippi and elsewhere in the Gulf Coast region are more than just fortified structures that will protect their owners from up to 250 mph winds and 36 foot storm surges — they are symbols of a grass roots movement that is determined to make the region insurable once again.
The movement is being spearheaded by a growing band of pioneers whose experience and talents have been fused by a passion to educate and motivate others to take action to fortify the region’s buildings and to bring insurance companies back to the battered Gulf Coast states.
Agent of change
Knowing the value of an easily insurable risk, Carl Schneider of Schneider Insurance Agency Inc., in Mobile, Ala., built a concrete home for his family in Daphne, Ala., in 2001.
Today, Schneider is tirelessly crisscrossing the region and beyond on his own dime, trying to educate consumers and legislators in the practical applications of home fortification. In concert with subject matter experts, he hopes to convince fleeing insurers to return to the coastal market but in a way that homeowners can afford.
Consumers, particularly those in south Missis-sippi, have an opportunity to take the first crucial steps when rebuilding homes on the blank landscape left in the wake of Hurricane Katrina. Schneider has made contacts in Mississippi and Florida in hopes of strengthening his crusade to revive the coastal insurance market.
According to Schneider, Alabamans can realize up to a 75 percent premium deduction if their homes — even existing structures — are properly fortified, but only if legislators adopt wording from an Institute for Building and Home Safety program already in place in Florida. He said an existing discount in Alabama is specific to fire resistant homes only. “Fire resistance has nothing to do with wind mitigation,” he said.
According to the Tampa-based IBHS, a nonprofit association, its “Fortified … for safer living” program specifies construction, design and landscaping guidelines to increase a new home’s resistance to natural disaster from the ground up. Fortified Program Administrator Chuck Vance said his group’s program is one that any builder can employ.
Fortified homes are built with extra attention to areas of a home that make it vulnerable to disasters, including openings (windows and doors); roofs and gables, and load path — a path from the peak of the roof to the foundation which greatly reduces the potential of a home coming apart during a windstorm.
While he realizes that not all builders will see the immediate advantages of fortified construction practices, Schneider is optimistic. “Some is better than none,” he says.
The independent insurance agent believes that an area with builders who are trending toward fortified standards is inviting to insurers and will ultimately contribute to improved market stabilization. Schneider said there is currently a “huge disconnect” between engineers, architects, builders and the insurance industry. “The builders want to build affordable to maximize potential revenue,” he said. “The problem is the incentives to build to the fortified standards are not in place.”
Alabama, Mississippi, Louisiana and Texas do not have mandatory standard building codes in place, but some individual counties or districts have adopted their own codes. Schneider said Mississippi is using the 2003 International Building Code, which he terms the minimum standard. He said to reach a point where homes are able to withstand catastrophic storms, they must be built to the maximum standard outlined in the IBHS program.
“We need an environment where we can enable contractors to do the right thing,” Schneider said. “Proper avenues of education and support from within the industry will help to bring about change.”
Sundberg house
Scott Sundberg is one Katrina survivor who knows the value of fortified construction. He is building a concrete house across Highway 90 from the Gulf of Mexico in Pass Christian, Miss. Sundberg is also a design engineer and a major contributor to the Federal Emergency Management Agency 550 report published in July 2006. The FEMA report, titled “Recommended Residential Construction for the Gulf Coast: Building on Strong and Safe Foundations,” details procedures for rebuilding homes destroyed by hurricanes. It also provides guidance in construction of new homes that will be less vulnerable to catastrophic storms.
According to Sundberg, the FEMA report would be a “very valuable addition to the list of design references” for anyone involved in planning a home or even a small commercial building in a hurricane storm surge zone. The report defines the many terms involved with coastal design. It also provides useful prototypes of foundations that are adaptable to homes of various sizes and configurations.
The cost of insurance should reflect the risk involved, Sundberg said. If the government merely underwrites or becomes the “backstop reinsurer” for wind insurance, the region runs the risk of rewarding poor practices and thereby putting its economy in peril, he added.
“It has been estimated that half the nation lives by a coast. We know how to build strong enough to mange the risk of wind damage at our coasts,” Sundberg said. “We should focus on guaranteeing that the risk of wind damage will be managed for whoever picks up the tab, whether it is the private sector, the government sector, or both.”
Sundberg’s concrete house is a weekend project in its eighth year of development. While nearing its final phase, the unfinished structure showed up in post Katrina aerial photos as the only building left standing in a debris field that once hosted a vibrant and moderately populated section of Pass Christian — an inkling of encouragement for insurers.
Sundberg designed his house based on the storm surge created by 1969’s Hurricane Camille. He allowed 22 feet from the base flood elevation to the bottom of the concrete beams that support the structure. He said Katrina created a 28 foot storm surge.
Sundberg is concerned that if local builders do not step up to the plate on building to maximum fortified standards, more than insurance markets will suffer.
“This makes good economic sense from day one. There is an immediate cost benefit positive ratio,” Sundberg said about investing in fortified construction. “What will kill us as a nation is if we continue to underwrite bad practices. You don’t only mitigate to protect your own assets; you mitigate as an obligation to your community and your neighbors.”
Schneider became concerned when he observed a new home being built up the street. He noticed that the builders were placing brick veneer on the wood frame home without the use of brick ties, which he said undermines the integrity of the effort to stabilize the insurance market along the Gulf Coast.
“We want to create a minimum uniform code for the entire region,” Schneider said. “Building codes by themselves do nothing — unless they are enforced consistently and equitably. Let’s not build to the lowest standard. We’ve got to come up with a long term solution. The survival of my business and the coast — and the country — depends on it.”
Building standards
According to IBHS, building standards must be engineered by licensed, accredited professionals and there must be a verification process in place for the entire insurance industry. The IBHS verification process involves pre-qualified inspectors meeting with the builder prior to construction to discuss the appropriate criteria and to review the building plans. The inspector visits the site about four times during construction to verify compliance with the standards. After the last inspection, the builder or homebuyer receives a certificate from IBHS designating compliance with the Fortified Program.
“We need a program like Scott’s and like the IBHS’,” agent Schneider said. “If we don’t guard against failure, we’ll be back in the same predicament as we’ve been seeing in the18 months since Katrina hit — the wind versus water claims issue.”
Schneider said FEMA developed a so-called SLOSH model (sea, lake, overland surge from hurricanes) as a tool for catastrophe evacuation purposes, which he claims discredits maps developed by the National Flood Insurance Program. He said agents relied on the FEMA NFIP maps to be correct and accurate.
“Unfortunately many of the NFIP maps were inadequate, outdated and did not take into consideration the potential surges associated with hurricanes,” Schneider said. “The SLOSH model is a better indicator of the true risk of hurricane storm surge. If only agents had been aware that the SLOSH model existed, they would have had the necessary information to advise consumers of the potential risk of storm surge, and the need to purchase federal flood coverage. The same holds true for insurance carriers who provided coverage on the coast. Had carriers been aware of the true risk of storm surges, many would not have written coverage in the surge areas without proof of adequate flood coverage.”
Sundberg said the SLOSH model takes into account factors such as the depth beneath the water and elevation of the land objects that may divert water. “It’s a very sophisticated calculation,” he said.
Advancing technologies
In the eight years since Sundberg began his project, new building technologies have surfaced. A.J. Scardino Jr., a residential and industrial construction consultant, specializing in insulated concrete forms, is building a 4,200 square foot concrete house in Bay St. Louis, Miss. One obvious feature on Scardino’s house not present on Sundberg’s is the addition of hydrostatic relief corners, which Scardino says will act like spoilers and provide directional flow to damaging winds.
Scardino said the cost of a home like his is only five to seven percent more than the cost to build a wood frame house. His savings in utility bills alone will compensate for the additional upfront money.
Schneider returns to the insurance ramifications. “We don’t want insurance companies to be susceptible to assessments because we didn’t enforce a building code on the Gulf Coast,” Schneider said.
Right now, these pioneers note, there is an inadequate supply of design engineers who know the ins and outs of designing in a flood zone. They hope that can be remedied because as Scardino pointed out, “when you begin building repetitively, insurance costs will come down for consumers.”
Sundberg and Schneider agree there is a need to not only define a higher standard building code along the Gulf Coast, but to also carefully enforce it. “We want a unified standard for the entire nation.” Schneider said. “We need to use the fortified standard as a carrot to draw carriers back into the region.”
“We know what to do and how to do it,” Sundberg added. “Until everyone has to adhere to the same standards, it’s a bitter pill to swallow. We really don’t have an option. To me it is not a question of can we afford to build right; it’s a question of how can we afford not to. The best insurance is assurance and time is of the essence.”
Schneider said he went to Alabama state officials prior to Hurricane Katrina and reported that the coast would be in extreme trouble when a catastrophic storm event occurs. They said there was no immediate or urgent concern.
“Unaffordable insurance rates have stopped commerce dead in its tracks,” Schneider said.