Research from the nation's largest private flood insurer shows that private carriers could assume up to 95% of the NFIP portfolio, significantly reducing the federal government's financial exposure to flood risk.
ST. PETERSBURG, Fla., Feb. 13, 2025 -- Neptune Flood Research Group has released its February report detailing the path towards an efficient free market for flood insurance.
The report finds the flood insurance market in the United States is currently distorted by two structural issues: (1) heavy government subsidization of flood risk through the National Flood Insurance Program (NFIP) and (2) extensive development in high-risk areas, particularly properties that have suffered repeated flooding. These factors have created an inefficient system where risk is improperly priced, and taxpayer money sustains a financially unstable program.
The NFIP's financial structure is unsustainable:
- $27 billion in subsidies between 2022 and 2037
- $22.5 billion in debt, with $2 billion added already in 2025
- $129 billion paid in claims (in 2024 dollars) since 1978
- 2.5% of policies account for nearly 50% of all payouts, highlighting the burden of repetitive loss properties
Despite its financial instability, the NFIP's dominance and subsidies have prevented private insurers from competing fairly. However, with advancements in catastrophe modeling and risk assessment, the private market now has the capability to absorb up to 95% of NFIP policies, provided that government-driven market inefficiencies are removed.
The report evaluates:
- The inefficiencies of the NFIP and its financial challenges
- The readiness of private insurers to take on flood risk
- A data-driven analysis of how many NFIP policies could transition to the private market
- Policy recommendations for an efficient transition that reduces taxpayer burden while maintaining affordability for homeowners
Key Findings Include:
- 95% of NFIP policies meet private market underwriting standards.
- 1M-1.4M NFIP policies (35-45%) could pay lower rates in the private market relative to their current premiums.
- 1.4M-1.9M NFIP policies (50-60%) could pay lower rates in the private market relative to their unsubsidized rates, representing 50-70% of the NFIP's premium base.
Key Recommendations:
- Remove Federal Subsidization – Eliminate broad government subsidies to allow market-driven pricing.
- Create a Takeout Program – Facilitate policy transfers from the NFIP to private insurers, as practiced by state-level programs including Florida's Citizens Property Insurance.
- Targeted Subsidies or Federal Tax Credits – Implement either state-managed, means-tested subsidies that apply to both NFIP and private policies, or federal tax credits.
"This report highlights a critical inflection point in the U.S. flood insurance market," said Trevor Burgess, President & CEO of Neptune. "The data is clear – NFIP's financial structure is unsustainable, and the private sector is ready and able to take on a substantial share of the risk. With advanced modeling, risk-based pricing, and substantial reinsurance capacity, private insurers can provide more comprehensive and competitively priced coverage than ever before. A well-managed transition will not only reduce taxpayer burden but also ensure that homeowners have access to insurance that truly reflects their risk. The future of flood insurance must be driven by market efficiency and consumer choice."
Click here to view the complete analysis.
About Neptune Flood
As the largest provider of private flood insurance in the United States, Neptune Flood continues to expand rapidly, offering a competitive alternative to the NFIP. Today, Neptune provides nearly $100 billion in coverage across over 225,000 residential and commercial properties, demonstrating both scale and stability within the flood insurance marketplace.
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