Last Updated: 06/23/2026

Issue: Floods are the most common and most destructive natural disaster in the United States. Ninety percent of all natural disasters involve flooding, and all 50 states have experienced floods or flash floods in the past five years, according to Floodsmart.gov. The damage from a flood is not covered under a standard homeowner's policy. Flood insurance is a special policy that is federally backed by the National Flood Insurance Program (NFIP) and available for homeowners, renters, and businesses. It is estimated that between 85% and 95% of homeowners do not have flood insurance.

Background: The National Flood Insurance Program (NFIP) was created as a result of the passage of the National Flood Insurance Act of 1968. Congress enacted the NFIP primarily in response to the lack of availability of private insurance and continued increases in federal disaster assistance due to floods. At the time, flood was viewed as an uninsurable risk and coverage was virtually unavailable from private insurance markets. The NFIP is a federal program, managed by the Federal Emergency Management Administration (FEMA), and has three components: to provide flood insurance, to improve floodplain management, and to develop maps of flood hazard zones.

The NFIP allows property owners in participating communities to buy insurance to protect against flood losses. Participating communities are required to establish management regulations in order to reduce future flood damages. This insurance is intended to furnish as an insurance alternative to disaster assistance and reduces the rising costs of repairing damage to buildings and their contents caused by flood. A homeowner is able to purchase excess flood insurance, but they must be covered by NFIP flood insurance first. Information detailing how to obtain flood insurance can be found at www.floodsmart.gov.

Since the NFIP was created, additional laws have been passed to improve its financial stability, mapping, and rate-setting. The 2012 Biggert-Waters Act aimed to strengthen the program by raising rates to better reflect flood risk, but concerns about higher premiums led to revisions. In response, the 2014 Homeowner Flood Insurance Affordability Act scaled back some of those changes, limiting rate increases, issuing refunds, and adding surcharges to balance affordability and program funding.

Private Flood Insurance
The Flood Insurance Market Parity and Modernization Act was introduced as HR.2901 in 2015 and S.563 in 2017 to help facilitate the development of the private flood market.

While the market for private flood insurance remains relatively small, in recent years, more sophisticated risk mapping and modeling have developed, enabling the private market to more accurately price the risk and generating new interest among private insurers to provide such coverage. Although the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) affirmed Congress’s intent that lenders may accept private flood insurance as an alternative to the NFIP, the definition and associated requirements have been cited as barriers to private market development.

There may be advantages to selecting a policy with a private flood insurance company, as they tend to offer higher coverage limits and optional coverage. Some companies may not require an elevation certificate, which could reduce time and cost. In addition, the private flood insurance market is using technology to offer more customized coverage, streamline claims processing, and enable faster digital communication.

With the implementation of the NFIP’s Risk Rating 2.0 in fall 2021, premiums are being recalculated to more closely reflect individual property-level flood risk. This updated methodology incorporates additional factors such as flood frequency, distance to water sources, rebuilding costs, and multiple flood types rather than relying primarily on  Premium increases may influence coverage decisions, including reduced participation in the NFIP and, in some cases, consideration of alternative options such as private flood insurance.

Congress and President Biden reauthorized the NFIP through September 30, 2024. The program has had numerous short-term extensions and proposed reform measures. The NAIC and state insurance regulators support a long-term reauthorization of the NFIP to avoid short-term extensions and program lapses that create uncertainty in both the insurance and housing markets.

The NAIC's NFIP reauthorization recommendations for Congress also includes encouraging growth in the private flood insurance market. Congress faces the challenge of trying to maintain a balance between improving the financial solvency of the program and reducing taxpayer exposure while also being mindful of affordability concerns.

The NAIC Property and Casualty (C) Committee was charged with creating a best practices document to help facilitate the private flood insurance market. This document was drafted by the NAIC Catastrophe Insurance (C) Working Group and has been adopted by the Working Group, as well as the Property and Casualty (C) Committee.  Currently, the committee is monitoring congressional legislation related to the reauthorization of the NFIP, as it is due to expire at the end of September.

In 2017, the NAIC Center for Insurance Policy and Research (CIPR) released the study Flood Risk and Insurance, which examines the rising flood risk in the country and the need to overhaul the NFIP while encouraging greater growth in the private flood insurance market. The NAIC has also placed increased focus on educating the public about potential damages and insurance claims related to floods. More details can be found under the Understanding Flood Insurance page through the NAIC's website.