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Flood Risk and Flood Insurance

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Abstract

Recent natural disasters have renewed concerns about insurance markets for natural disaster relief. In January 2025, wildfires wreaked havoc in residential areas outside of Los Angeles. Direct damage estimates for the Los Angeles wildfires range from $76 billion to $131 billion, with only up to $45 billion of insured losses (Li and Yu, 2025). In this post, we examine the state of another disaster insurance market: the flood insurance market. We review features of flood insurance mandates, flood insurance take-up, and connect this to work in a related Staff Report that explores how mortgage lenders manage their exposure to flood risk. Mortgages are a transmission channel for monetary policy and also an important financial product for both banks and nonbank lenders that actively participate in the mortgage market.

Suggested Citation

  • Kristian S. Blickle & Evan Perry & João A. C. Santos, 2025. "Flood Risk and Flood Insurance," Liberty Street Economics 20250807, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:101400
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    File URL: https://libertystreeteconomics.newyorkfed.org/2025/08/flood-risk-and-flood-insurance/
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    JEL classification:

    • G52 - Financial Economics - - Household Finance - - - Insurance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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