The head of one of the largest private flood insurance writers this week questioned AM Best’s report that private flood companies have not been able to make significant inroads into America’s difficult flood market.
“From 2020 to 2022, private insurers’ share of the total flood market increased, but their growth stalled in 2023,” the AM Best report released on Monday claimed.
Private flood lighters’ market share has stagnated in the face of greater opportunities, the financial rating agency noted.
“…Private flood insurance companies primarily provide written coverage to commercial insurers and have shown some acceptance of flood risk, but the increase in insured amounts to date has been minimal. ”
Hurricanes are increasing in parts of the country, especially Florida and other southeastern states, the National Flood Insurance Program is facing increasing debt levels, and parts of Washington state are abuzz about repealing the NFIP. The growth of the private flood market is becoming increasingly important. Overall, the report points out that:
“But without the NFIP, there would be a huge void in the flood insurance market. Private flood insurers don’t seem keen to fill it at this point,” said Best Analyst Christopher Graham. The report, written by David Blades and Sridhar Maniem, says: .
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But Trevor Burgess, CEO of underwriter Neptune Flood, which writes for the four news agencies, disputed the claims in Best’s report.
“The conclusions reached do not reflect our experience as industry leaders,” Burgess said in an email Monday.
He noted that St. Petersburg, Fla.-based Neptune has experienced significant growth in recent years, from about 50,000 flood insurance policies at the end of 2020 to more than 250,000 policies today. AM Best’s report appears to be based in part on a data review by the National Association of Insurance Commissioners, which has caused some confusion, he said.
Although the NAIC data call only asked for information on recognized private flood contractors, Burgess said most private floods come from excess and redundant lines, including reports written through Neptune. Ta. He also said that while NAIC’s data call asked insurers to exclude NFIP coverage, “some insurers” complied by providing NFIP coverage information.
Officials from Wright Flood, another prominent author of U.S. private flood policy, declined to comment on the Best report because the company was preparing for the impact of Hurricane Milton in Florida.
A spokesperson for AM Best said late Monday that the rating agency’s data on private flood insurance comes primarily from insurers’ annual reports filed with the NAIC, which Burgess may have been referring to. Supplemental Data Report. AM Best noted that the data is believed to be accurate.
Just as thousands of homes and businesses in Florida, North Carolina and Tennessee are struggling to recover from Hurricane Helen, which battered the region with devastating rainfall late last month. The report provides another insight into the current state of flood insurance. Most property owners did not have flood insurance before the storm.
Burgess
In fact, the number of NFIP policies has declined over the past two years, in part due to higher premiums due to Risk Rating 2.0, a new federal approach designed to more accurately price risk. The report claims that. Despite a statutory glide path that limits NFIP premium increases to no more than 18% annually, “the initial increases will be too burdensome for some policyholders,” Best’s report said.
However, as NFIP premiums increase, private flood carrier rates should become more competitive. But even as risks accelerate, it’s unclear whether private insurers are willing to take on additional flood risk.
Hurricane Helen, which is expected to hit the west coast of Florida on Wednesday night, and Hurricane Milton could further worsen the NFIP’s $21 billion debt, the report said. Historically, federal flood programs have been effective in covering losses from river flooding, but coastal storm surges and flash flooding have caused significant losses, the Best report said.
Last month, the NFIP was temporarily reauthorized by Congress until Dec. 20, likely sparking new debate about the wisdom of maintaining the program. The Heritage Foundation’s Project 2025 is calling for an end to federal flood programs if Donald Trump becomes president in January. This is a blueprint that many in the insurance industry oppose.
Click on the graph to see a larger version. (AM Best Report)
“Full reauthorization of the NFIP would provide Congress with an opportunity to improve the program by minimizing complexity while strengthening the financial framework…” the Best report states. “In either case, the private market will need to take on more risks, but may not want to do so without significant price increases.”
The report noted that the share of private insurers in flood insurance premiums increased significantly from 2016 to 2022, with the share of private insurers peaking at 32%. In 2023, this percentage decreased slightly.
The report pointed out that despite the fact that flood lines are making considerable profits, there is a lack of market development by private flood writers, if accurate. The combined ratio for private flood insurance companies fell from a painful 199.4 in 2017 to a surprisingly healthy 32.3 in 2023. By comparison, the combined ratio for the 2023 federal flood program was 90.2, the report said.
According to the report, the largest private flood carriers for commercial coverage determined by directly paid premiums are Zurich US, Berkshire Hathaway, Assurant, and Liberty Mutual.
Some in the Florida insurance industry have suggested that private flood insurance may not be growing as much as expected, in part because many insurance agents are not promoting it. . The commissions paid by the NFIP can be large, but some private flood writers pay small commissions.
Neptune officials said last month that the company “pays competitive commission rates, and agents value the speed and ease of use of our system, which allows them to earn more per hour worked compared to NFIP.” can be significantly increased.”
Most private flood insurance companies also offer much higher insurance limits. This means higher premiums and relatively higher commission amounts.
One idea in Congress could improve federal and private flood insurance coverage. Sen. Rick Scott (R-Florida) has introduced a bill that would give homeowners insurance premiums a federal income tax break. If the measure becomes law, it could ease the burden of insurance claims and free up flood insurance for some policyholders.
Photo above: Ann Schneider (right) hugs her friend Eddie Sampson as they survey the damage from Hurricane Helen in Marshall, North Carolina. (AP Photo/Jeff Roberson)
Topics Flood
