PwC: Rising Waters: Understand Flood Risks, Insurance Gaps, and Risk Mitigation Strategies

Summary

Many homeowners are unaware of the critical importance of flood insurance. Despite the increasing frequency of flooding events, only 15% of homeowners carry coverage, underscoring a significant gap in both awareness and preparedness.
Standard homeowners’ insurance does not cover flood damage, and federal regulations restrict access to information about a prior owner’s flood claims, potentially leaving homebuyers vulnerable to purchasing a flood-prone property.
Risk mitigation measures, such as floodproofing techniques or elevating a home, can enhance a property's resiliency in the event of flooding. Additionally, government assistance may be available to support these retrofits.

It takes less than an inch of water to flood your home. To put this staggering fact into perspective, just one extreme downpour can overwhelm drainage systems and quickly lead to flooding, causing significant damage to homes.

In the United States, flooding causes more damage than any other natural disaster, according to the Palm Beach Post. Buildings that are properly protected from flooding cost more but fare better in the event of a flood. According to the National Institute of Building Sciences, every dollar invested in flood mitigation will save you $6 compared to the cost of recovery.

The Perfect Storm

Yet even as these once-in-a-lifetime heavy rain events are becoming more common, according to our 2023 benchmarking study, only 15% of homeowners nationwide have flood insurance included in their programs.

Further, the Federal Emergency Management Agency (FEMA) regulates flood zones, and their maps are based on historical data, which may mean their mapping—especially as it relates to urban growth and intensification— is outdated. When natural areas are developed, there is generally an increase in stormwater runoff, which aggravates flooding, as indicated in the "Trends Affecting Urban Flooding" study. This is a gap in the FEMA maps and sadly left many North Carolina homeowners vulnerable to damages and losses when Hurricane Helene hit, as reported by WRAL.

Another big misconception is believing that if your home falls outside of the worst flood zones, it is not susceptible to flooding. This is simply not true. It is therefore all the more critical that you pay attention to where your home is located, the weather patterns that occur around it, and understand how a larger rain event could impact your home.

Take the Northeast as an example. It has experienced flooding from several hurricanes in the past decade, from the Carolinas up through New York. In 2024, Hurricane Debby brought heavy rains (2 to 8 inches) and flooding to an area stricken with drought. The combination of the two events – drought and heavy rain - lead to more catastrophic flash flooding.

It was a perfect storm: more rainfall, fewer homes protected by flood insurance, and a gap in policyholder awareness.

Understanding Disclosure Limitations

Under current federal statute, a prospective homebuyer is not entitled to receive any information regarding prior flood insurance claims from the National Flood Insurance Program (NFIP) on the property in question.

Disclosure without the consent of the claimant and/or current homeowner is prohibited under the Privacy Act, leaving many surprised when a flooding event occurs.
More recent state laws may address this, such as a 2024 law in Florida. That law requires a seller to disclose if they had a claim related to flood damage on the property and if they have received federal assistance due to flood damage.

Still, on the whole, many prospective homeowners remain unaware that if they purchase a home that has had repetitive losses, they may have higher premiums and may be required to take actions to mitigate future losses, such as elevating structures, according to the NFIP.

Evaluating Flood Risk

Unlike hurricanes, which can be predicted days in advance, heavy rain events often provide little time for preparation. This is why it is critical to assess where you home is located and observe the characteristics of your community.

You can begin by asking yourself the following questions:

Are you on or downstream from a dam-controlled lake?
Do you live near a temporal creek or tributary? Does its flow increase during rain events?
Are you downhill from a newly developed community or commercial project? (The development of previously natural lands could mean water will be redirected toward your home.)
Do you live in an area that is close to a major river or water tributary?
Are you building a home in a new development in a coastal community?

Asking the right questions, working with your risk mitigation team, and speaking to an engineer who specializes in flooding will help you understand your risks and plan your build accordingly. The unfortunate reality is that building codes aren’t a foolproof way to protect your home; you must also do your own due diligence.

Atlanta, Georgia via Axios Atlanta

Mitigation Strategies for Homeowners

Recent advances mean there is an array of products that can help homeowners in flood-prone areas protect their properties.

1. The Lift

The first action to improve a home for flood protection is to increase its elevation, commonly referred to as lifting the home. Lifting a home is a challenging task but may be necessary if you wish to live in coastal areas like New Orleans or North Carolina. It is also the best long-term solution and shows insurance companies that you aim to protect your property now and in the future.

Insurance carriers, even when not offering flood coverage, still review the elevation of a home and may decline coverage for homes located below the Base Flood Elevation (BFE). Just the chance of a loss—not necessarily caused by floodwaters—is enough to make many carriers shy away from covering low-elevation homes.

Rebuilding and repairing homes can be vital if you cannot uproot your life or if you have chosen to stay in a specific community. By elevating a home above the floodplain or as directed by local zoning authorities and using proper techniques and with a certified contractor, you can potentially prevent most, if not all, future flood damage. Do:

Consult with a structural engineering firm before proceeding with the elevation process.
Raise any mechanical equipment, such as HVAC units, backup generators, and electrical components, above BFE.
Check to see if you qualify for government grants or assistance programs to help with the cost of elevating your home.

2. Floodproofing

Another option is to floodproof your home. There are two types of floodproofing methods: passive floodproofing and active floodproofing, and these correlate with how they sound.

Passive Floodproofing (the "set it and forget it" route)

Replace doors and windows with floodproof products.
Consider products such as Fenex, which are not only floodproof, but also impact rated. Cities like Charleston, SC are also using Fenex in innovative and creative ways to maintain views and aesthetics, while also better protecting their infrastructure from future flooding events. These same products can be used in your home.
Use automated passive floodproofing. These devices will remain hidden until the floodwaters activate the device; then they will deploy and lift upwards to protect an area.

Active Floodproofing (little more prep time and effort)

Consider active floodproofing measures for areas where advance planning is possible and you will have time to set up barriers, etc.
A prime example is when Tampa Bay General Hospital deployed an AquaFence during Hurricanes Helene and Milton. The 8-foot AquaFence around the perimeter of the hospital kept floodwaters at bay. There are other products on the market; some require water to be used to weigh the barrier down, but all aim to protect a structure from flooding.
Use alternative resources. For instance, barriers could be used to redirect the mudflow floodwaters that typically come in an area recently affected by wildfire during the rainy season.

Combining both strategies—using the lift for their main residence and deploying floodproofing in the lower levels of their home and garages—can protect valuable assets stored at or below street level.

Floodproofed garages can protect vehicles from being flooded during hurricanes and heavy rain events. During Hurricanes Helene and Milton and the ensuing floods, WUSF reported that the batteries in electric cars got wet, some caught fire, and some burned entire homes to the ground, resulting in a total loss. Floodproofing the garage can not only protect your home from flooding but also safeguard you from additional hazards.
Floodproofing products are adaptable and can protect elevator shafts and other equipment in the lower levels of your home. Proactively doing so will reduce post-flood damage, cleanup costs, and restoration efforts, and add to your peace of mind during the event itself.

Sandbags are no longer the only way of protecting your home in the event of flooding. “The sandbags of yesteryear have been replaced with professionally engineered and thoroughly tested flood mitigation systems,” according to the Palm Beach Post. You can look at utilizing flood barriers like expandable walls and self-inflating dams, which are designed to prevent water damage during natural disasters and consult with professionals to ensure the option selected best fits your needs.

Regulations to Support Resilient Homes and Communities

The Federal Flood Risk Management Standard (FEMA) recently made updates to require communities to adopt flood resilience measures when rebuilding after disasters, which will directly impact homeowners. Homeowners will now need to ensure that new structures are better protected against future flooding. Under the new regulations, communities must show that their recovery plans reflect the best available science to counter future flood risk due to climate change-related weather.

Connect with a Risk Advisor

While the steps to improve your home against flooding may seem overwhelming, they are essential for safeguarding your property. Homes can be upgraded to withstand flooding, often with a few simple mitigation measures. If you live in a flood-prone area and have questions about your home, reach out to your property insurer and risk advisor for additional risk mitigation tips and guidance.