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Flood Insurance Facts and Statistics

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Flood Insurance Facts and Statistics

By: Adam M. Matheny

NFIP & FEMA

While damages from flooding are typically not included in standard homeowners’ insurance or renters insurance, property owners and renters can get insurance via the NFIP (National Flood Insurance Program. This program is administered by FEMA (Federal Emergency Management Agency). Some private insurers are also now able to administer policies under this program, which makes flood insurance backed by the federal government available in qualifying areas. With the exception of widespread disasters, the program is self-supporting.

FEMA has begun transferring its risk to private insurers in recent years, acquiring funding from select reinsurers to mitigate risk. In 2020, that coverage is at $1.33 billion, a slight increase from the previous year. The coverage is provided by 27 private reinsurers, accounting for a little over 10 percent of losses from $4-$6 billion, about 35% between $6-$8 billion, and a little over 20% between $8 billion and $10 billion. Overall, the cost of reinsurance coverage has increased nearly $30 million from 2019.

FEMA has also secured funding from catastrophe bonds in recent years, with $800 million coming from these bonds in 2019 and $500 million the previous year. These transactions cover NFIP loses in the event of named storms that impact the US and its territories. It will continue this practice in 2020.

In order to sell and renew policies, NFIP must be periodically renewed by Congress. While it can still pay claims during a lapse, the inability to issue and renew policies is problematic.

The program is also facing changes this year, with plans to shift to risk-based pricing and individual property assessment versus rates calculated based on flood zones. These new rates will be announced in April of 2020 and implemented in October of 2021.

An Insurance Information Institute survey in 2018 found that flood insurance policy numbers were growing—but not enough, with only about 15% of American homeowners carrying a policy.

Private Flood Insurance

Over the past five decades, the NFIP has provided property owners with coverage that the private market could, at its inception, not provide. However, advances in technology have made it possible for private insurers to more accurately underwrite risk. Last year, mortgage lenders were allowed to begin accepting private flood insurance so long as the policies follow the same regulatory definitions (or provide adequate protection) as the NFIP policies.

This is good news, considering increasing flood risks in coastal states from storm surges, and throughout the United States due to climate change.

Facts and Figures

  • In 1983, the Write Your Own program was started, allowing insurers to issue policies under their own company’s name, on behalf of the federal government. In 2019, 59 companies participated.
  • Nearly 90% of NFIP policies were held in the WYO program in 2018.
  • In 2019, nearly 70% of policies were for single family homes. Another 20% covered condos, and about 5% were for non-residential properties. The remainder were for multi-family units.
  • The highest NFIP payouts recorded, as of 2019, were the result of Hurricane Katrina, with over $16 billion. Hurricane Harvey came in second at $8.9 billion and Superstorm Sandy took third place, with $8.8 billion.
  • 2017’s Hurricane Irma accounted for $1 billion’
  • In 2016, NFIP payouts peaked in Louisiana. Texas, South Carolina, Missouri, West Virginia, New Jersey, Mississippi, Arkansas, Florida, and Oklahoma were also in the top 10.

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