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Whether private-sector insurers will want to enter the flood-insurance business is unclear.
“While the National Flood Insurance Program (NFIP) explores the potential to share at least some of its exposure with primary insurers, reinsurers, and/ or catastrophe bond investors,” said the Deloitte Center for Financial Services in a 2014 report, “there is no guarantee that such private market players will be eager or even willing to take on such risks, considering the factors that have left the current federal program so heavily in debt.” Future Options What are the options which might make flood insurance more viable? One possibility is the increasing use of piggyback policies where the first $250,000 in coverage comes from the NFIP and the balance is through the private sector. Such policies could be required by mortgage lenders making big loans on waterfront properties. Second, a one-claim-and-out policy could be adopted. According to the American Academy of Actuaries, “about 1 percent of NFIP-insured properties have accounted for more than 33 percent of the claims paid, according to one estimate. Owners of properties that have incurred multiple claims for flood damage could be required to pay higher insurance premiums.”
The combination of changing weather and ongoing insurance coverage will have to be resolved because flood insurance that is either too costly or simply unavailable threatens too many properties in too many places to be tolerated.”
and up 10.7 percent over the past five years — three times slower than the 36.5 percent increase in sales volume in the past five years in counties with a “Very Low” flood risk. Room For Private Flood Insurance? The combination of changing weather and ongoing insurance coverage will have to be resolved because flood insurance that is either too costly or simply unavailable threatens too many properties in too many places to be tolerated. One very possible alternative is a greater involvement by the private insurance industry.
to lower premiums to the point where the private sector has been unable to compete. Writing for Forbes last August, Michael Thrasher explained that “primary insurers — those that sell standard insurance policies to individuals and businesses — haven’t sold flood insurance in the private market for more than half a century. Companies could not charge affordable premiums and profit when private flood insurance was proposed in the 1950s. The lack of a private market ultimately led to the creation of the National Flood insurance Program (NFIP) in 1968 and the sale of government flood insurance policies that the private market was unable to compete with, until recently.”
The $24 billion in taxpayer subsidies provided so far have allowed the NFIP
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