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The Federal Emergency Management Agency (FEMA) recently produced updated flood risk maps based on new modeling technology. The new maps significantly expanded the number of properties located in "Special Flood Hazard Areas."

This blog previously looked at the dramatic impact of the revisions to the flood risk maps for Boston, where the number of residential properties located in Special Flood Hazard Areas more than doubled, rising from 8,000 to 18,000. The number of covered businesses jumped from less than 300 to almost 4,000.

This could have significant ramifications for many financial institutions, because federal banking regulations mandate that mortgaged properties must be covered by flood insurance if they are located in a flood zone.

Properties outside of high-risk zones can also be damaged by flooding, even if the area doesn't typically have the right conditions. This fact was recently on display in Pensacola, Florida, where unprecedented flooding recently caused at least $100 million in property damage, according to Mayor Ashton Hayward.

"Obviously we're prepared for hurricanes but when you talk about flooding, Pensacola has never had this kind of flooding," Hayward told CNN.

Florida Governor Rick Scott reportedly declared a state of emergency in the affected area and lamented that many homeowners "didn't buy flood insurance because they didn't think they were in a flood area." The lesson to learn here is about the importance of identifying and managing potential risks by ensuring that properties are insured for the appropriate value.

Options for protecting residential properties from flooding are limited

In a recent interview with Bankrate, Tim Reinhold, senior vice president of research and chief engineer at the Insurance Institute for Business & Home Safety, explained that elevation is essentially the only thing that can definitively keep a building safe from flooding. He said that while engineers can design structures to be resilient to strong winds, there is only so much that can be done to keep water out of a house during a flood.

"Once the water reaches the level of your floor and goes an inch above, you have significant damage," Reinhold said.

Bankrate noted that most of the steps homeowners can take to mitigate the cost of a flood focus on keeping valuable possessions out of harm's way. However, protecting the structure of the house itself is extremely difficult, as structural changes like raising the house on columns can be prohibitively expensive.

Coastal areas may face a more obvious risk of flooding, but even landlocked communities can find themselves inundated with rain to the point that flooding becomes an issue for property owners. Pronto can provide an accurate replacement cost to be used for flood insurance coverage for properties in financial institutions' portfolios.