The US private flood insurance market is growing, addressing the nation’s significant gap between economic and insured losses from flood events, which remain largely underinsured despite being one of the costliest perils for homeowners, a recent report by Fitch Ratings has revealed.
In the US, flood insurance historically had a very low take-up rate. Most policies were purchased due to mortgage requirements for homes in high-risk areas, primarily through the National Flood Insurance Program (NFIP).
According to the report, “US Private Flood Insurance: Trends and Insights”, recent growth in the private flood insurance market has been driven by a combination of enhanced technology and analytics, as well as changes to federal flood insurance policies, and new legislative initiatives.
Christopher Grimes, Fitch Ratings, said: “Flood risk is one of most costly perils facing homeowners in the U.S. but remains broadly underinsured. The private flood insurance market continues to grow as a complement to the National Flood Insurance Program, offering solutions that can narrow the flood insurance gap.”
Private residential flood policies in force (PIF) grew by a compound annual growth rate of 20% between 2020 and 2024, compared to a -2% for federal flood policies.
In 2024, approximately $0.5 billion in private residential flood premium was written, alongside $750 million in private commercial flood business.
The market has generally shown favourable underwriting performance, the report noted, with direct case incurred loss ratios for residential flood below 50% in all but one calendar year over the past five years.
Since private flood data became a separate line item in the Insurance Expense Exhibit (IEE) nine years ago, the industry has only experienced one underwriting loss. This occurred in 2017, due to the impact of multiple landfalling hurricanes, most notably Hurricane Harvey.
The direct combined ratio for private flood in 2017 reached 188.2% (the net of reinsurance combined ratio was 186.2%). In the seven calendar years from 2018 to 2024, the average direct combined ratio was 60.4%.
The Private Flood Supplement provides additional transparency into the private flood market.
Over the past decade, the global reinsurance market has been slowly gaining exposure to US flood risk over, through both support of primary flood business and the NFIP’s reinsurance program.
“Reinsurers and Lloyd’s syndicates have provided capital support, underwriting and flood modelling expertise along with various white-label products to MGAs, program managers and carriers, which has encouraged growth over the last several years,” Fitch stated.
Munich Re, Swiss Re, and Hiscox have developed turnkey solutions to provide private flood products and capital for flood programs.
In the federal flood market, the NFIP developed a catastrophe reinsurance program, including annual traditional placements with private reinsurers and multi-year capital market transactions, to spread the risk of catastrophic US flooding among a global panel of partners.
In addition to traditional reinsurance market placements, the NFIP has sponsored seven catastrophe bond transactions since 2018 each issued with a three-year risk period through the FloodSmart Re vehicle. As of 2025, over $3 billion of reinsurance limit has been placed with capital market participants since the initiation of the program.
US flood modelling and mapping enhancements in recent years have greatly contributed to the attractiveness of underwriting private flood products.
Additionally, legislative initiatives encouraging a reduction in flood risk borne by the US government, in addition to NFIP’s risk-based rating methodology, may lead to further consideration of private flood products for certain individual risks.
Recent US hurricane landfalls and flood events have exposed a significant gap of flood coverage, with a considerable amount of economic losses resulting from these events not covered by standard property insurance.
Historically, flood insurance take-up has been low. However, this presents an opportunity for the insurance industry to introduce new products and capital, which would make communities more resilient to flooding and narrow the gap between economic and insured losses.
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