FEMA Review Council recommends shifting the National Flood Insurance Program toward the private market

MAY 15, 2026 | BY MICHAEL PALLAS

A Major Shift Toward the Private Market

On May 7, 2026, the President’s Council to Assess FEMA released its final report. Among its ten key recommendations is a comprehensive plan to reform the National Flood Insurance Program, shifting it toward a primary role for the private market while repositioning NFIP as a backstop.

 

The Council’s case rests on a few hard numbers: NFIP carries over $20 billion in debt with roughly $700 million in annual interest payments, its mapping methodology dates to the 1970s, and its policy goals (affordable, financially sound, available to all, risk-informed) actively pull against each other. The report’s response is to make room for private capacity to take on more of the risk while NFIP retreats to a backstop role.

Eight Recommendations That Reshape Flood Insurance

The Council outlined a strategic shift anchored by these moves:

 

  • 01  Continue Risk Rating 2.0 and modernize flood maps to reflect property-level hazard
  • 02  Implement risk-based pricing at actual cost
  • 03  Revise Write Your Own compensation, currently around $1 billion annually (~29% of premium)
  • 04  Launch a voluntary take-out program to transfer eligible NFIP policies to qualified private insurers
  • 05  Evaluate a national flood insurance marketplace: a centralized clearinghouse
  • 06  Engage state insurance commissioners consistent with McCarran-Ferguson
  • 07  Address repetitive loss properties through targeted mitigation
  • 08  Statutorily exempt the NFIP from Endangered Species Act consultations

 

The marketplace concept is the most novel of the eight, and the one most likely to reshape how private flood policies are placed.

How a National Flood Marketplace Would Work

When a consumer applies for flood coverage, the application would route through a centralized clearinghouse, administered by a wholesaler or insurer consortium under FEMA oversight.

 

Participating private carriers get the first chance to quote. If a private offer comes in within 10% of the NFIP Risk Rating 2.0 actuarial rate, the consumer is steered to the private policy. NFIP becomes the backstop, not the default.

 

The model has precedent: Florida’s Citizens Property Insurance Clearinghouse has used a similar mechanism since 2014 to depopulate the state insurer of last resort.

Consumer Applies

Application enters the clearinghouse, typically triggered by mandatory purchase for federally-backed mortgages in flood zones.

Private Carriers Quote

Qualified private flood insurers, vetted for financial stability, get the first opportunity to offer coverage.

Pricing Tested

Private offers within 10% of the NFIP Risk Rating 2.0 actuarial rate trigger placement with the private carrier.

NFIP As Backstop

If no qualifying private offer comes in, NFIP writes the policy as a last resort, not the first option.

What This Means for Agents

This is a multi-year transition. Most of the Council’s recommendations require Congressional action, so realistic implementation is measured in years, not months. But the direction is clear, and a few things follow from it.

 

Private flood is poised to grow. Carriers that already write competitive private flood coverage will have more room to operate, more customers to reach, and more opportunities through take-out programs that transfer existing NFIP policies. Risk-based pricing means accurate, property-level risk data will only matter more, whether the policy ends up with NFIP or a private carrier. And for agents, distribution will keep shifting toward platforms that surface multiple options side-by-side rather than steering by default to the federal program.

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