Editor's Note: This is the first in a four-part series examining how risk, regulation, and technology are reshaping flood insurance, and why the private market is no longer optional.
When most Americans think about flood risk, they picture coastal storms and beachfront homes. That mental model is decades out of date.
Flooding is the most common and costly natural disaster in the United States. Since 1996, 99% of U.S. counties have experienced a flood event. But the losses growing fastest aren't on the coast; they're inland, in urban areas and places no one flagged as high risk: Flash floods in Appalachian valleys; Overwhelmed stormwater systems in Sun Belt suburbs; Riverine flooding in communities that haven't seen high water in a generation.
Hurricane Helene made this painfully clear. In September 2024, some of the hardest-hit areas (including Asheville, North Carolina) had not experienced significant flooding in more than a century. Only 1% to 2% of residents in the affected inland counties carried flood insurance.
Across Helene and Milton, the National Flood Insurance Program (NFIP) received 80,000 claims and faces estimated losses of $7.8 to $10.3 billion. Yet only about 3% of American homeowners carry any flood insurance at all.
The maps don't match the risk
The Federal Emergency Management Agency (FEMA) Flood Insurance Rate Maps (FIRMs) remain the primary tool for defining who is at risk and who must carry coverage. If you're in a designated flood zone with a federally backed mortgage, you are required to buy. If you're not, nobody tells you to.
But these maps don't reflect a world where storms are intensifying, flood events are becoming more frequent, and risk varies dramatically from one property to the next. FEMA identifies 7.9 million properties as high-risk. The First Street Foundation puts the real number above 17.7 million. Nearly 10 million high-risk properties sit outside official flood zones, are exempt from insurance mandates, and are often built without flood-proofing standards. Between 2019 and 2023, more than 211,000 new homes were built in high-risk areas FEMA maps classified as safe.
The maps were designed for a world in which flood risk meant proximity to a river or the coast. Today, it's driven by rainfall intensity, urbanization, aging drainage infrastructure, and more frequent extreme precipitation. Legacy mapping cannot capture that.
Underestimating risk leads directly to underinsurance
When the maps say a property is safe, everything downstream follows. The lender doesn't require coverage. The agent doesn't bring it up. The homeowner assumes they're fine.
Neptune's 2024 Consumer Survey found that over 60% of respondents incorrectly believed their homeowners policy covered flood. Nearly 70% of non-policyholders said they simply didn't think they needed it. These aren't edge cases; they're the mainstream, shaped by a system that treats flood risk as binary: you're in a zone, or you're not.
The NFIP mismatch is showing
The NFIP was established in 1968 to fill a genuine void, and its contributions to floodplain management deserve recognition. But the program was designed for a narrower definition of flood risk, focused on mapped floodplains driven by coastal storms. Its structure reflects those assumptions: coverage capped at $250,000, pricing historically tied to zones rather than properties, and heavy participation in mandatory mapped high-risk areas.
As flood risk has expanded beyond those boundaries, the strain shows up in three ways:
- Premium shock: Risk Rating 2.0 moved toward property-level pricing, but the necessary rate increases have accelerated policy attrition. The NFIP has dropped from 4.7 million contracts (equivalent to buildings covered) at its 2009 peak to less than 3.6 million today.
- Coverage gaps: The Federal Reserve Bank of Philadelphia found 80-90% of at-risk households are either underinsured or have no flood coverage at all. The average out-of-pocket shortfall during a 1-in-100-year flood event (meaning there is a 1% chance of flooding in any given year) falls between $103,000 – $136,000.
- NFIP strain: The program has required 35 short-term reauthorizations since 2017. It carries $22.5 billion in Treasury debt, with nearly $2 million in interest accruing every day. Put another way, 11 cents of every dollar paid in premiums goes not toward protecting policyholders, but toward servicing that debt.
The stakes are clear
Flood risk is not reverting to historical norms. Climate patterns, development trends, and population growth are all pushing more economic value into harm's way. The private market has responded, with higher coverage limits, more flexible policy options, faster claims processing, and global reinsurance capacity exceeding $715 billion. But availability alone doesn't close the gap. That will require changes in how risk is mapped, how insurance is communicated and sold, and how the NFIP and private market share the load.
In my next article, I'll examine why the NFIP's challenges are structural, not just political, and why they ripple across real estate, lending, and the broader insurance market.
Trevor Burgess is CEO of Neptune Flood, a flood insurance provider in the United States. Neptune is publicly traded on the New York Stock Exchange (NYSE: NP).
Opinions shared here are the author's own.
(Featured image credit: burnstuff2003/Adobe Stock)
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