Flooding: Everyone is Exposed, Few are Insured, But New Options Entice

2 ADJUSTINGTODAY.COM There are two important qualifications to the private flood totals, however: • The figures reflect changes in how premium is reported, and do not, on their own, signify an increase in private flood premium volume; and • Nearly 40 percent of the private flood premium is reported by one company, FM Global, which specializes in broad property coverage — including flood coverage — for large industrial risks. FM Global accounted for nearly 70 percent of the increase in premium reported from 2017 to 2018. 6 Leaders in the private and public sectors are hopeful that new techniques for measuring flood risk, plus a new requirement that mortgage lenders accept private flood policies that meet federal standards, will increase private market participation in protecting communities and property owners from flood losses. Three Models While little has changed in the overall market for flood insurance, much is changing regarding the flood insurance options available to property owners. At the beginning of the 21st century about the only option most property owners had for purchasing flood coverage was to buy a policy from the NFIP. That policy might carry the brand of a private insurer under the NFIP’s “Write Your Own” program, but the risk was assumed by the NFIP and, by extension, the U.S. Treasury. The NFIP is still the “public option” so to speak for any property owner in the U.S. that seeks flood coverage. The NFIP cannot turn down an applicant in a participating community, and still offers subsidized rates for properties at high risk. In recent years, however, two alternatives have emerged for property owners: Despite those and other highly publicized flood events, the number of policies written by the National Flood Insurance Program (NFIP) actually fell over the past 10 years, from a high of 5.7 million policies in 2009 to 5.2 million in 2018. 3 Private flood insurance has picked up some of the slack, but not much; the NFIP still provides more than 95 percent of the nation’s residential flood coverage. 4 Private insurers account for a much larger share of commercial flood insurance, but still less than half. Between 2016 —when the National Association of Insurance Commissioners (NAIC) introduced an annual statement line for reporting private flood insurance — and 2018, the number of private insurers reporting private flood premium increased from 46 companies to 124. The amount of private flood premium reported over that period increased from $358 million to $681 million. 5 of the nation’s residential flood coverage. 95% NFIP still provides more than