The ongoing US government shutdown has put the National Flood Insurance Program (NFIP) on hold, causing disruptions in thousands of property transactions and opening doors for private flood insurers. Since the NFIP stopped issuing new policies, renewals, and amendments on September 30, many homebuyers are turning to private insurers for flood coverage.
Experts say this shift could benefit private insurers for the long run. Christopher Graham, a senior analyst at AM Best, points out that once policyholders switch during the shutdown, they might stay with their new insurers simply because it’s easier or more convenient. The NFIP’s suspension has delayed over a thousand real estate closings daily, which is a big deal since the program supports about half a million home sales each year.
The impact is especially strong in places like Florida and Texas, where flood insurance is often a must-have for buyers. Florida, in particular, faces challenges as it has the most properties in special flood hazard areas across the US. Industry voices recommend that buyers consider private flood insurance. These companies often provide broader coverage, including higher policy limits and coverage for extra living expenses if homes are damaged.
Private insurers also have an edge with technology. They use advanced tools such as drones and detailed data analyses to assess flood risk more precisely for each property. This helps them set fairer prices and offer more flexible policies. On the other hand, NFIP is often criticized for using outdated flood maps and strict rules. For example, the NFIP doesn’t refund unearned premiums if a policy ends early, making switching or adding coverage during a policy term harder compared to private options.
The private flood insurance market has grown steadily over the years. AM Best reports that private providers held less than 13% of the market in 2016, but that number rose to 27% by 2024. It might even be close to 40% when adjusted for different reporting methods. Some industry leaders feel the NFIP should change its role to cover only risks that private insurers can’t, as the private market already has the tools and capacity to handle most flood insurance needs.
This suspension of the NFIP may reshape flood insurance in the US. While it has caused challenges for homebuyers and sellers in the short term, it could lead to a stronger role for private insurers in the future. Buyers and homeowners now have more reasons to explore private flood insurance options that offer greater flexibility and coverage.