Pressures from real estate interests and the media have led to recent amendments to the 2012 Flood Insurance Reform Act, and rate increases will now be capped at 18 percent. Frank Nutter asks: is there hope for a private flood insurance market in the US?
Since 1968, flood insurance for residential properties in the US has largely been a government market. Because it provided subsidised rates for nearly one in four insured homes and charged no rate for catastrophic floods on any risk, the National Flood Insurance Program (NFIP) pre-empted competition from the private market.
In addition, mortgage lenders required NFIP coverage to accept flood insurance for security on home loans, thus bolstering the need for the federal programme. Like government insurance programs in many countries, the programme’s fiscal woes—with a $25 billion debt—ultimately forged a bipartisan political effort to transform the programme and restore its fiscal integrity.
Frank Nutter, RAA, 2012 Flood Insurance Reform Act, Flood Insurance