Private Market Flood Insurance Is Budding

Private carriers are dipping their toes in the turbulent waters of flood insurance, writes Insurance Information Institute (I.I.I.) research manager Maria Sassian.

This year, for the first time, insurers were required to report in their annual statements data on private flood insurance.

I.I.I. has compiled a list of top insurers in the market by 2016 direct premiums written, based on data from S&P Global Market Intelligence:

As you can see, the top three companies hold almost 81 percent of the market share, and at number one FM Global has a 54 percent market share. Direct premiums written for all companies total $376 million.

Private flood includes both commercial and private residential coverage, primarily first-dollar standalone policies that cover the flood peril and excess flood. It excludes sewer/water backup and the crop flood peril.

Some of the reasons private insurers are becoming more comfortable covering flood risk include: improved flood mapping technology; improved flood modeling; the construction of flood resistant buildings; and encouragement from Congress.

The Federal Emergency Management Agency’s National Flood Insurance Program (NFIP) is billions of dollars in debt due to large losses from Hurricanes Katrina, Rita and Superstorm Sandy. Opening the market to private insurers is one of several measures enacted by lawmakers to get the program out of debt.

Another step in shoring up the NFIP took place with the January 2017 transfer of over $1 billion in financial risk to private reinsurers. FEMA gained the authority to secure reinsurance from the private reinsurance and capital markets through the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowners Flood Insurance Affordability Act of 2014 (HFIAA).

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