Wide Gap Between Economic and Insured Losses
The disparity between economic flood losses and insured flood losses remains significant. AccuWeather estimates that the recent catastrophic flooding in Texas could lead to economic losses of $18 billion to $22 billion. However, insured losses are expected to account for only a fraction of that total.
Drivers of Market Expansion
Fitch expects the gradual expansion of the private flood insurance market to continue. Contributing factors include:
- Advancements in flood mapping technology and analytics
- Regulatory developments supporting private market participation
- Risk-based pricing implementation within the National Flood Insurance Program (NFIP)
Premium Growth and Market Share
While private flood insurance premiums have grown rapidly, they still make up a small share compared to federal flood policies. Direct premiums written (DPW) for private residential flood nearly doubled between 2020 and 2024, rising from 277,000 policies to approximately 569,000. Over the same period, premium revenue increased by 240% to reach $0.5 billion.
By comparison, the broader homeowners insurance market saw DPW totaling $170 billion in 2024. This means that even significant economic flood losses have a relatively minor effect on the overall property and casualty industry’s financial results.
Underwriting Performance and Risk Distribution
Private flood insurance has delivered strong underwriting results in recent years. From 2018 to 2024, the average direct combined ratio for residential flood insurance was 60.4%, with the direct case incurred loss ratio staying below 50% in all but one year. The only recent underwriting loss was recorded in 2017 due to Hurricane Harvey.
The global reinsurance market and Lloyd’s of London syndicates support much of the underwriting exposure for private flood insurance. Over the past decade, these markets have increased their participation in U.S. flood risk, both in backing private flood insurance and supporting the NFIP’s reinsurance program.
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