Increasing insurance premiums for disaster-related coverages pose significant challenges for public entity risk managers.

But strong insurer-broker relationships, along with effective loss-prevention efforts, can help public entity risk managers navigate the complex insurance coverages after a large-scale disaster, experts say.

Donna James-Spruce, risk manager for the city of Corpus Christi, Texas, uses the National Flood Insurance Program and also purchases excess flood and wind insurance, she said.

“We're trying to get the maximum coverage for the best value and that's a challenge, especially for cities and counties and school districts,” Ms. James-Spruce said.

While the city, which is perched on the Gulf of Mexico, maintains good loss experiences, Sandy and other weather-related events around the world have put pressure on premiums, Ms. James-Spruce said.

“When you're hit with … an increase in your premium, then you have to either pay it, which most of us don't have that kind of money in our budget, or you have to start carving away at your program. As a risk manager, that's so hard to do,” she said.

“Insurance solutions in a disaster can be pretty difficult,” said Mary Breighner, Cincinnati-based vice president and global practice leader of FM Global's public entities, health care and education unit. Insurers are very aware and concerned about the aggregation of exposures in any one area, Ms. Breighner said.

Such risks are predictable risks, which are difficult to insure, Ms. Breighner said. “So large deductibles are going to be pretty common,” she said.

There also are uninsured consequences of loss, particularly if business interruption insurance coverage is not purchased, along with excluded coverages such as mold damage, she said.

%%BREAK%%

Risk managers should focus on loss prevention that, among other things, focuses on protecting property, which in turn will increase available capacity in the insurance marketplace and result in better rates, Ms. Breighner said.

As part of planning, public entities should be working with their underwriters before a disaster occurs, said Frank Russo, New York-based managing director of Aon P.L.C.'s global risk consulting unit.

“If and when a disaster occurs, an adjuster's time and attention is limited, especially in a regional disaster,” Mr. Russo said. “Those adjusters and public entities who already know each other can quickly get to work and speed up recovery.”

Dan Hurley, senior director of risk management for Norfolk, Va., public school district also has policies through the nation's flood insurance program, some of which won't cover all of the district's schools, he said.

“Our property carrier, as well as our broker, helps identify which schools (NFIP) won't cover for basic flood coverage,” Mr. Hurley said. “We actually have to obtain a policy separately for those particular buildings.''

“The frustrating part about the initial flood policies is that you have to buy per structure,” he said. For example, one school with multiple structures requires a policy for each, all of which need to be renewed annually.

Rising premiums and higher wind deductibles are “going to be a challenge,” Mr. Hurley also said. “Our budgets were already submitted back in December and if you have a July renewal, you're trying to forecast … basically two years instead of one.”