The implementation of the National Flood Insurance Program's (NFIP) Risk Rating 2.0 represented a major change to the organisation's methodology used to set flood premiums. But recent figures suggest that the uplift in prices has, according to the Environmental Defense Fund, led to an “11–39% decline in new NFIP policies and a 5–13% drop in renewals of existing policies”, with those reductions most evident in lower income areas.
In a country where the penetration of flood insurance has historically been low and largely restricted to flood prone areas, that reduction is not good news for overall flood resilience, particularly given the impact of climate change and the threat of flood risk to new regions. However, there are clear signs that the private flood insurance market is making significant inroads into the development of affordable and accessible products that should help reverse those trends in the coming years.
Flood vulnerability
Hurricane Harvey in 2017 remains a stark illustration of the flood protection gap. Despite widespread flooding, the Washington Post reported that only 17% of homeowners in the eight counties most affected had flood insurance. More recent events show this lack of insurance is not an isolated issue. Less than 1% of homeowners reportedly held flood cover during the Asheville flooding in 2024, with similarly low penetration in “low risk” areas following the atmospheric river flooding in Washington State in 2025.
"There are plenty of stories of homeowners who have either had flood insurance in the past and cancelled it because of the cost, or chose never to buy cover in the first place, partly because of the cost but also because they lived in an area that had never flooded before,” says Hiscox’s Ben Burge – Flood Underwriter. “Sadly, many of those homeowners have then been hit by a flooding event and left without a financial safety net.”
In addition to this absence of cover, another problem has been the issue of inadequate limits for those homeowners who have protection from the NFIP: “The NFIP US$250,000 limit for building property cover – in place for over 20 years without adjustment for inflation – no longer reflects the increase in house prices in recent years. The median sale price for a home in the US is now over US$400,000 with some states as high as US$800,000, meaning there are many homeowners remaining underinsured relative to the value of their homes even when they do have flood cover,” says Burge.
Affordable cover
The good news is that private flood products, such as Hiscox’s FloodPlus, continue to evolve by delivering broader coverages, significantly higher limits and, crucially, often at lower premiums for both homeowners and businesses. "At Hiscox, we've been able to use technology to better model the actual flood risk for specific locations, rather than relying on less accurate and often outdated flood maps,” says Burge. “It means we can price a risk for a homeowner at both the higher and the lower ends of the market at a competitive premium, while also being more sustainable in the long term. For the price of a weekly takeaway coffee, homeowners in many states now have the option to buy flood insurance.”
It’s a move that has made flood insurance much more accessible to many who have previously gone without cover, adds Burge: “Since the launch of our low premium flood policy, we are seeing areas of uptake in many states where flooding has historically not been a problem, but homeowners are recognising that climate change is impacting that trend. More homeowners are starting to consider and buy flood insurance, which is a major step towards plugging the flood vulnerability gap.”
More awareness needed
Getting the product right is one thing, but greater take-up also demands better awareness amongst both homeowners and their insurance agents. "We need to make sure that retail agents can help homeowners understand the potential flood risk that the property may face, even in areas viewed as low flood risk. One way of doing this is by streamlining the insurance buying process and offering a flood coverage quote alongside their homeowners insurance policy renewal, allowing the homeowner to see at the same time how affordable a flood policy can be," says Burge.
Regulatory support
As well as making the buying journey easier and reducing friction in the process, additional help could also come from the regulators. "If a customer leaves the NFIP, they effectively lose their NFIP-specific subsidies and discounts, which means even if the private market is offering a more competitive premium with broader coverage, they are not incentivised to change. If those discounts could be preserved, it would help provide comfort to policyholders that they can leave the NFIP but there is the option to return and retain their discount for the future,” explains Burge.
A market that will continue to evolve
The private insurance market will, however, continue to evolve to help homeowners and businesses protect themselves from the growing flood risk says Burge: “Where flood insurance might have previously been seen as a ‘nice to have but too expensive to buy’ purchase, that dynamic is shifting as the private market adapts and innovates to offer broader cover at a lower premium.”
