The US flood insurance market is once again facing uncertainty amid the lapse in authorization of the National Flood Insurance Program (NFIP) amid the ongoing government shutdown.
While the program’s periodic disruptions have become routine in Washington, industry experts warned that the latest pause highlights the vulnerabilities of relying on a government-run system. At the same time, private insurers are increasingly stepping in to fill the void.
Brad Turner (pictured), vice president and national product manager for flood at Burns & Wilcox, said the NFIP’s repeated stop-start cycles have pushed the industry to a pivotal moment.
“They keep kicking the can down the road every six months,” Turner told Insurance Business. “When it aligns with the government shutdown, it becomes an exasperated problem because there’s nobody there to reauthorize. Everything just comes to a standstill.”
The NFIP, launched in 1968 and administered by FEMA, insures more than 5 million US properties. But Turner noted its structure leaves it vulnerable to political gridlock.
The program requires frequent reauthorization, has borrowed heavily from the US Treasury, and still operates with coverage limits unchanged since the 1970s. “It's a very fragile program,” Turner said.
Should a major hurricane strike during a lapse, delays in payouts could worsen, particularly since NFIP’s borrowing authority shrinks from $20 billion to just $1 billion without congressional action.
But what once would have been a market crisis is now a chance for private carriers to prove their resilience. Private insurers now offer higher coverage limits, faster claims processing, and innovative products that are not available under the NFIP, Turner pointed out.
And unlike the NFIP, whose maximum building coverage remains capped at $250,000, private carriers can tailor policies to modern rebuilding costs and add-on protections.
“If you asked me at the beginning of my career, a lapse would be catastrophic,” Turner said. “But we’re at a point now where the private flood market can step in and keep the real estate market moving.”
He highlighted parametric coverage as one of the most exciting developments in the private market. Instead of adjusting claims after a loss, parametric policies trigger automatic payouts when specific flood conditions, like water depth at a property, are met.
“Once that trigger happens, it’s paid directly to the consumer within a month,” Turner said. “That’s a much quicker process than waiting two or three months for an adjuster.”
Despite the promise, challenges remain for the private flood insurance market. Pricing in high-risk coastal regions, such as Louisiana and Florida, can be “exponentially more expensive” in the private market, according to Turner. For heavily exposed properties, coverage may be difficult to secure at all.
A major hurdle is awareness. Only about 4% of American homeowners currently carry flood insurance, despite the fact that, according to Turner, a homeowner is 30 times more likely to suffer a flood loss than a fire loss during a 30-year mortgage.
Outdated flood maps compound the problem. Many zones deemed “low risk” still experience devastating floods. “Almost 40% of flood losses are happening in non-mandatory zones,” Turner said, pointing to Hurricane Harvey in Houston and Hurricane Ian in Florida as prime examples.
“The maps are looking into the past,” he added. “They take seven years to update, but flood risk can change in a year. With climate change, it’s only going to get worse.”
The private flood market is growing quickly. NFIP once controlled 95% of all primary flood policies; today, private carriers hold roughly 10% of that market, representing billions in premiums. Turner said he has seen a noticeable shift in the last five years, with both agents and consumers increasingly exploring private options.
“Agents are starting to proactively seek out private flood insurance for the first time in history,” Turner said. “The customization, the ability to layer coverage, and the modelling tools we have now allow us to give consumers a much clearer picture of their true risk.”
As floods become more frequent and severe, Turner believes education and proactive planning will be key. Still, NFIP and private flood insurers will need to coexist. While FEMA provides disaster relief that private insurers cannot replicate, private carriers can fill gaps with speed, efficiency, and flexibility.
“Flood is now a primary peril,” Turner said. “The NFIP will always play a role. But private flood insurance is no longer an alternative; it’s becoming a cornerstone of how we manage flood risk in this country.”
