The Growth Of Private Flood Insurance


The Growth Of Private Flood Insurance

By: Adam Matheny

Private Flood Insurance is Growing, Becoming More Competitive And Less Profitable

According to the S&P Global Market Intelligence, the 2017 statutory insurance filings show that the market for private written flood insurance grew by 51.2% in 2017. At the same time, the markets at the state level became more competitive while yielding fewer profits.

The Numbers

By the numbers, private coverage represents approximately 15% of flood insurance premiums across the nation. In dollar figures it looks like this:

  • Private flood insurance premiums in 2016, $412.6 million
  • Private flood insurance premiums in 2017, $623.8 million
  • NFIP flood insurance premiums as of January 2018, $3.57 billion


Congress is still debating reforms to the National Flood Insurance Program (NFIP) that would allow the private market to take a more significant role in protecting those who live in flood zones. Last November, the House passed legislation that would allow state insurance regulators to choose which of the private insurance policies are equivalent to those offered by the NFIP with regard to federal lending laws. It would also take away the requirement for commercial property owners to mandatorily purchase coverage. At the same time the legislation would deny both residential and commercial property owners whose properties suffer from extreme repetitive losses and refuse to implement any form of flood mitigation NFIP coverage.

Currently, the U.S. Senate has yet to take action regarding reforming the program which was extended to November 30th. The data collected by the S&P comes from filings made by the National Association of Insurance Commissioners (NAIC) and state regulators. All figures include commercial and residential policies, plus those written in the admitted, excess, and surplus lines. In 2017 Florida surpassed California and became the most significant private flood insurance market at a time when the state is already the largest NFIP market.

Double-Digit Growth

In all states except Maine, the sales of private flood insurance grew by double digits. In Maine, the market actually dropped by 3%. Larger markets showed the highest growth in premium dollars while the private insurance market showed growth from a small base in many states. There were five states where the premiums more than doubled from 2016 to 2017.

At the same time the private flood insurance markets are growing, so too is the competition. Both the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) use data collected by the Herfindahl-Hirschman Index (HHI) to determine the degree to which the various markets are most likely to be subject to monopolistic control.

Ultimately, current information shows that while the NFIP is still the big player in the game, private flood insurance is on the rise and is paying out on “real claims.” If the federal government takes advantage of the opportunity to expand coverage, but they must provide more clarity as to which policies are likely to meet current federal lending standards. Currently, Louisiana has the lowest percentage of coverage at only 4.9%.

At the same time both Florida and Texas, the highest and third highest private flood insurance coverage states account for only 8.4 and 11.8 percent of coverage. The private flood insurance market is growing, for example in Washington D.C. it accounts for almost 66% of the market.

Fears Based On Myths

Those who are critical of the switch to private flood insurance fear this will allow private insurers to “cherry” pick where and whom they provide coverage for. The reality is that since all the properties covered by the NFIP are “high-risk,” there are no “cherries” per se for them to pick through.  Private insurers now seem more willing than ever to extend flood coverage, even those who live in areas considered to be in the highest risk coastal “V” zones. This willingness has helped drive down the cost of coverage as competition has begun to heat up.

While the NFIP currently has over 5 million flood insurance policies, the need for private insurance is expected to experience significant growth in the next few years, with over 41 million people living in flood zones around the country. While Roy Wright, NFIP Administrator has launched what he called a “moonshot plan” to double enrollment in the program within the next five years, this won’t be enough to cover the 13 million people currently projected to be at elevated risk. The only possible way to close this gap in protection is for private insurance to step up and make it happen.

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