Private insurers are increasingly ready to shoulder more US flood risk, and a new analysis by Neptune Research Group argues that it is time for the federal government to step aside.
The group's latest paper calls for a phased transition that would gradually shift the National Flood Insurance Program's (NFIP) new business to the private market while maintaining coverage for existing policyholders.
Under Neptune's proposal, current NFIP customers would be allowed to renew their coverage indefinitely, ensuring continuity for homeowners who have long relied on the federal program. However, the NFIP would stop issuing new policies, directing future buyers to the private flood market instead.
For households unable to obtain coverage after documented declinations, which are estimated at around 5% of potential policyholders, the NFIP would remain available as a safety net, the report suggested.
Neptune's recommendations come as the NFIP faces deep financial strain. The program is now $22.5 billion in debt, an increase of $2 billion in 2025 alone. Congress previously forgave $16 billion of NFIP debt in 2018, yet the program continues to accumulate losses. Neptune argued that continuing to expand the NFIP in this state effectively transfers more flood exposure to US taxpayers, even as the private market has developed the capacity and analytics to handle it more efficiently.
The report also suggests that this transition could be executed by the administration without the need for new legislation. Neptune said FEMA has previously acknowledged, in internal guidance, that it has authority to halt new NFIP enrollments if necessary.
According to Neptune's estimates, about 95% of new flood policyholders could find coverage in the private market today, with roughly 60% paying lower premiums than they would under NFIP's full-risk pricing. The shift would transfer an estimated $550 million to $700 million in annual premiums to private insurers, with nearly all NFIP policies moving to the private market within six to seven years.
Neptune maintained that such a move would reduce taxpayer exposure, foster competition and accelerate innovation in flood underwriting, positioning the private market, rather than the government, at the center of managing one of the nation's most persistent natural perils.
