Neptune Flood proposes roadmap to shift NFIP policies to private market

Neptune Flood, a provider of private flood insurance in the United States, has unveiled a roadmap for transitioning National Flood Insurance Program (NFIP) policies to the private market, in order to reduce the government’s financial exposure to flood risk.

In its latest report, Neptune Flood found two main structural issues that distort the US flood insurance market: (1) heavy government subsidization of flood risk through the NFIP and (2) extensive development in high-risk areas, particularly properties that have suffered repeated flooding.

These factors, analysts state, have created an inefficient system where risk is improperly priced, and taxpayer money sustains a financially unstable program.

This includes $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; and only 2.5% of policies account for nearly 50% of all payouts, which highlights the burden of repetitive loss properties.

Neptune Flood stated: “Despite its financial instability, the NFIP’s dominance and subsidies have prevented private insurers from competing fairly.

“However, with advancements in catastrophe modelling 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.”

Among its key findings, including the fact that 95% of NFIP policies meet private market underwriting standards, the report stated that 25-45% (1M-1.4M) of the policies could pay lower rates in the private market relative to their current premiums.

It also revealed that 50-60% (1.4M-1.9M) of NFIP policies could pay lower rates in the private market relative to their unsubsidized rates, representing 50-70% of the NFIP’s premium base.

In its report, Neptune Flood recommends a number of changes, including the removal of federal subsidization to allow for market-driven pricing.

They also propose the creation of a takeout program to facilitate the transfer of policies from the NFIP to private insurers, similar to state-level programs like Florida’s Citizens Property Insurance.

Finally, they suggest implementing either targeted, means-tested subsidies at the state level applicable to both NFIP and private policies, or federal tax credits to ensure affordability.

Trevor Burgess, President & CEO of Neptune, said: “This report highlights a critical inflection point in the U.S. flood insurance market. 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 modelling, 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.”

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