Research from the nation's largest private
flood insurer shows that private carriers could assume up to 95% of
the NFIP portfolio, significantly reducing the federal government's
financial exposure to flood risk.
ST.
PETERSBURG, Fla., Feb. 13,
2025 /PRNewswire/ -- Neptune Flood Research
Group has released its February report detailing the path towards
an efficient free market for flood insurance.
The report finds the flood insurance market in the United States is currently distorted by
two structural issues: (1) heavy government subsidization of flood
risk through the National Flood Insurance Program (NFIP) and (2)
extensive development in high-risk areas, particularly properties
that have suffered repeated flooding. These factors have created an
inefficient system where risk is improperly priced, and taxpayer
money sustains a financially unstable program.
The NFIP's financial structure is unsustainable:
- $27 billion in
subsidies between 2022 and 2037
- $22.5 billion in debt,
with $2 billion added already in
2025
- $129 billion paid in
claims (in 2024 dollars) since
1978
- 2.5% of policies account for nearly 50% of
all payouts, highlighting the burden of repetitive loss
properties
Despite its financial instability, the NFIP's dominance and
subsidies have prevented private insurers from competing fairly.
However, with advancements in catastrophe modeling and risk
assessment, the private market now has the capability to absorb
up to 95% of NFIP policies, provided that government-driven
market inefficiencies are removed.
The report evaluates:
- The inefficiencies of the NFIP and its financial
challenges
- The readiness of private insurers to take on flood risk
- A data-driven analysis of how many NFIP policies could
transition to the private market
- Policy recommendations for an efficient transition that reduces
taxpayer burden while maintaining affordability for homeowners
Key Findings Include:
- 95% of NFIP policies meet private market underwriting
standards.
- 1M-1.4M NFIP policies
(35-45%) could pay lower rates in the private market relative to
their current premiums.
- 1.4M-1.9M NFIP policies
(50-60%) could pay lower rates in the private market relative to
their unsubsidized rates, representing 50-70% of the NFIP's
premium base.
Key Recommendations:
- Remove Federal Subsidization – Eliminate broad
government subsidies to allow market-driven pricing.
- Create a Takeout Program – Facilitate policy
transfers from the NFIP to private insurers, as practiced by
state-level programs including Florida's Citizens Property Insurance.
- Targeted Subsidies or Federal Tax Credits –
Implement either state-managed, means-tested subsidies that apply
to both NFIP and private policies, or federal tax credits.
"This report highlights a critical inflection point in the U.S.
flood insurance market," said Trevor
Burgess, President & CEO of Neptune. "The data is clear
– NFIP's financial structure is unsustainable, and the private
sector is ready and able to take on a substantial share of the
risk. With advanced modeling, risk-based pricing, and substantial
reinsurance capacity, private insurers can provide more
comprehensive and competitively priced coverage than ever before. A
well-managed transition will not only reduce taxpayer burden but
also ensure that homeowners have access to insurance that truly
reflects their risk. The future of flood insurance must be driven
by market efficiency and consumer choice."
Click here to view the complete analysis.
About Neptune Flood
As
the largest provider of private flood insurance in the United States, Neptune Flood continues to expand rapidly,
offering a competitive alternative to the NFIP. Today, Neptune
provides nearly $100 billion in
coverage across over 225,000 residential and commercial properties,
demonstrating both scale and stability within the flood insurance
marketplace.
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SOURCE Neptune Flood
