In an era where retailers face mounting pressures forcing increased store closings and bankruptcy filings, the full impact on the industry in the wake of devastation caused by Hurricane Harvey is still unfolding. A preliminary estimate by Moody’s Analytics places damages from Harvey at between $86 billion and $108 billion, with between $8 billion and $11 billion attributed to lost economic output. Losses in the Houston area include not only property damage, but business interruption and supply chain losses resulting from the widespread closures of refineries, ports, airports, roads, and other infrastructure. To that end, business interruption and contingent business interruption claims may extend beyond just the area crippled by the storm, to those reliant upon travel to Texas, shipments to Texas, materials from Texas, and other interruptions resulting in lost profits.

For many smaller businesses located in Harvey’s path of destruction, additional challenges loom. Since many private insurers exited the flood insurance business nearly a century ago, the only option for many business owners is the National Flood Insurance Program (NFIP). The program, which has undergone few updates since the 1970’s, does not provide standard protections for small businesses, including costs of business interruption and significant disaster preparation. For many, losses are expected to exceed maximum coverage under the federal program.

By September 30, 2017, Congress is supposed to reauthorize funding for the program for the next five years. An NFIP reform bill introduced by Senate Banking Committee Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) includes a feasibility study regarding business interruption coverage – coverage that many affected by Harvey lack. While many retailers and small businesses in the Houston area seek to rebuild, the topic of flood insurance coverage, whether government sponsored or private, is likely to receive increased scrutiny. As the tally of Harvey’s impact continues to rise, retailers should be aware of ongoing discussions and potential changes to coverage options for flood-related damages.