Report Highlights Widening Flood Insurance Gap Amid Rising Flooding Risks

Insurance Information Institute

MALVERN, PA — The Insurance Information Institute (Triple-I) has released an updated Issues Brief, “Flood: State of the Risk,” drawing attention to the widening gap in flood insurance coverage across the United States. The report underscores the persistent vulnerability of inland areas to both tropical and severe convective storms, despite low homeowner adoption of flood insurance due to widespread misconceptions about coverage.

Floods, capable of causing substantial damage with even a small amount of water, remain largely uninsured by standard homeowners policies. This gap in coverage was starkly highlighted by the catastrophic impact of Hurricane Helene in September 2024, which inundated a large portion of the U.S. Southeast and southern Appalachia. The hurricane unleashed 40 trillion gallons of water, resulting in hundreds of deaths and billions in insured losses, particularly affecting western North Carolina. Notably, fewer than 1% of Buncombe County residents had federal flood insurance at the time of the disaster.

In a similar vein, severe thunderstorms in July 2023 led to devastating floods in eastern Kentucky and central Appalachia, resulting in 39 fatalities. Federal flood insurance coverage was notably sparse in the affected areas prior to the flooding.

Dale Porfilio, Chief Insurance Officer at Triple-I, remarked, “Though approximately 90% of all U.S. natural disasters involve flooding, many homeowners still are unaware that a standard homeowners policy doesn’t cover flood damage.” Porfilio also pointed out that many homeowners mistakenly believe flood insurance is unnecessary unless mandated by mortgage lenders.

The National Flood Insurance Program (NFIP), established in 1968, currently covers more than half of all homeowners with flood insurance. However, the private flood insurance market has begun to expand, fueled by advancements in data and analytics that allow insurers to better assess flood risks. Since 2019, federal regulations have permitted mortgage lenders to accept private flood insurance, leading to increased participation by private insurers.

Porfilio noted the growing involvement of private insurers: “This increased interest in flood among private insurers offers hope for improved affordability of coverage at a time when NFIP’s Risk Rating 2.0 reforms have more accurately aligned pricing with flood risk.”

The Triple-I’s report serves as a crucial reminder of the importance of flood insurance and the need for homeowners to be informed about the limitations of their current policies in the face of increasing flood hazards.

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