How costly a problem is flooding? A report from the First Street Foundation says that U.S. commercial buildings could sustain flood damage worth $13.5 billion in 20221 — a number likely to grow annually. And Swiss Re reports that floods remain the number one peril throughout the world, and that losses from floods have grown at a significantly faster pace than global gross domestic product.2

Until recently, the main source of flood insurance for both commercial and residential property owners has been the NFIP. However, advanced technology and new, sophisticated risk modeling have allowed increasingly more of the private insurance market to step in and cover the risk.

FEMA's Risk Rating 2.0 Now in Effect

The number of private companies writing flood insurance is growing. That's a good thing for agents and their clients — and just in time, as the second phase of FEMA's Risk Rating 2.0 took effect April 1, 2022.

Property owners in low-lying areas across the country are expected to see their flood insurance premiums rise when they renew their policies under Risk Rating 2.0, while in other areas, some policyholders' premiums may be reduced under Risk Rating 2.0.

Broader Coverage Options and Flexibility Available in Private Flood Market

Here comes the good news: As renewals approach, agents now have more choices when shopping for their clients' flood insurance. Namely, the private market.

Better risk modeling has helped the private market expand their products, resulting in a growth of product availability and locations where the product is offered, including coastal areas. This growth gives the customer more options and the ability to compare costs and quality of coverage. In fact, private insurers offer both higher limits and broader coverage options than the NFIP.

"The NFIP is an off-the-shelf product that can't be customized," says Christa Nadler, RPS area executive vice president.

"With the private market, you can modify a program to fit your client's needs," Nadler adds. "For example, the NFIP requires a policy for each separate location, which is extremely cumbersome. A school or municipality with multiple locations doesn't want to deal with managing separate policies for each of its locations. With a private insurer, you can design one policy listing all locations either with separate limits or with one shared limit."

The Private Flood Market Offers Stability

Program stability is another benefit of the private flood market.

"As a government program, the NFIP requires reauthorization," says Nadler. "There is concern year after year that Congress won't authorize the program."

Another option, for agents with insureds needing higher flood limits, is combining private flood insurance and a separate excess flood policy so that the risk is shared, making the coverage more affordable.

"In addition, the private market can provide a solution when standard markets are sub-limiting, restricting, or removing coverage under their master programs," Nadler says. "Traditional E&S [Excess & Surplus] carriers are available to replace the cover or provide excess above the standard markets."

NFIP Should No Longer Be the Default Option

The RPS team expects more flood insurance alternatives to become available over the next several years as technology and risk modeling continue to advance. Gone are the days of assuming that the NFIP is the best and only option; the booming private market allows agents to shop around for flood insurance just as they can any other coverage, and that's good news for insureds.

Contributor Information


1 "Climbing Commercial Closures," First Street Foundation, Dec 13, 2021.

2 Bevere, Lucia and Federica Remondi. "Natural Catastrophes in 2021: The Floodgates Are Open," Swiss Re Institute, Mar 30, 2022.