The Emerging Private Residential Flood Insurance Market in the United States

The federal National Flood Insurance Program (NFIP) underwrites the overwhelming majority of residential flood insurance policies in the United States. As of April 2018, more than 5 million NFIP policies were in force nationwide (4.8 million residential), representing slightly more than $1.28 trillion in coverage ($1.17 trillion residential). For decades, the NFIP has been homeowners’ only option for flood insurance, but over the past several years, a small private market for residential flood insurance has emerged. Policymakers are increasingly interested in learning whether the expansion of this market could help meet the policy goals of increasing the number of homeowners with flood insurance or offering more affordable coverage.Stakeholders—in congressional testimony, op-eds, reports, and other forums—have offered diverging opinions as to the appetite of the private sector in writing more flood insurance, on the existing barriers to private coverage, and on the implications for the NFIP. The present state of the market is unclear, particularly since there is no nationwide database on the companies writing residential flood insurance, coverages offered, policy terms, pricing, and any differences between private and NFIP flood insurance. This makes it difficult to evaluate the market’s future evolution and relationship to the NFIP.This report aims to fill these knowledge gaps and has two primary objectives:to document the current state of the private, residential flood insurance market across the United States; andto identify the main factors influencing the number and form of flood insurance policies offered by the private market.To meet these objectives, we conducted in-depth, semi-structured interviews with 63 insurers, reinsurers, state brokers, and other market participants. We also gathered and analyzed current private market data from a range of sources including public documents, congressional testimony, news articles, state regulators, and private firms.