Private flood insurance has quietly become a competitive force, offering better coverage and pricing as frustration with the National Flood Insurance Program (NFIP) mounts.
The NFIP, once the only option for homeowners and businesses, has long been criticized for its low coverage limits and lack of flexibility. With rising flood risks due to climate change and evolving property needs, consumers have sought alternatives that address losses beyond structural damage - like business interruption and building upgrades.
As policyholders began demanding higher limits and more comprehensive coverage - particularly for business interruption and building improvements - the private sector stepped in to fill the void.
Between 2016 and 2022, the private flood insurance market in the United States experienced significant growth. According to the Insurance Information Institute (Triple-I), private flood insurance policies grew by 24%, with direct premiums written increasing from $3.29 billion in 2016 to $4.09 billion in 2022.
“They offer low maximum limits. They offer very basic coverage, and that has led to an increase in private markets coming on board,” said Brian R. Catalano (pictured), vice president of national flood insurance sales and underwriting at AFR Insurance Services.
Where once there was a single private market to work with, Catalano now has access to nearly a dozen. For many consumers, particularly those in flood-prone areas with mortgage requirements, the appeal of competitive pricing and better coverage has fueled this growth.
Those gaps aren’t just about additional features - they’re critical for safeguarding both property and livelihoods. The NFIP only pays commercial and other residential claims at actual cash value, while private markets offer claims payments at replacement cost value. In commercial settings, especially, the stakes are high.
“They're looking for excess coverages. They're looking for business interruption. They're looking for improvements and betterments coverage,” Catalano said.
The increase in damaging storms over the past five years has only accelerated demand. Businesses that once overlooked flood insurance are now rethinking their strategies after witnessing firsthand how flooding can devastate operations.
“A lot of business owners have seen not only what kind of damage it can do to a piece of property, but what kind of damage it can do to their overall business,” Catalano said.
Demand tends to rise in lockstep with hurricane patterns. Regions along the Gulf Coast, from Texas to Florida, and up through the Carolinas, have seen some of the most aggressive growth in private flood interest. Yet even as demand grows, supply doesn’t always keep pace.
“Some of those areas are very difficult to get coverage in,” he said, referencing the heavy losses private insurers have taken in recent hurricane seasons.
Adding to the complexity is the shrinking availability of flood coverage in all-risk property markets. Even low-risk zones are being excluded, forcing agents to turn back to the NFIP or the expanding - though cautious - private flood sector.
“Now they’re excluding it. So, agents are having to come out and look in the private market, look at the NFIP to try to place the coverage elsewhere,” Catalano said.
In this competitive and constrained landscape, AFR differentiates itself through specialization.
“We don’t sell any other lines of insurance. It is only flood,” Catalano said.
That single-line focus allows them to offer nuanced coverage that other carriers may overlook or avoid.
“We can also write business interruption coverage. We can also write straight improvements and betterments coverage,” he said.
These are policies designed not only for building owners but for leaseholders, who often misunderstand what’s truly covered.
“A lot of them think [if] they get $500,000 in contents coverage that they're going to be covered. But that's not always the case,” Catalano said.
Homeowners, too, benefit from options like loss of use, which covers temporary relocation during repairs. For business clients, keeping operations intact during a shutdown can be the difference between survival and closure.
Yet for all the added features, the tipping point in decision-making remains the same: cost.
“Price is the number-one driving factor for folks purchasing insurance,” Catalano said.
No matter how tailored the coverage, if private insurers can’t beat NFIP pricing, many clients won’t bite.
“That insured is going to go with the cheapest option out there, and if that's the NFIP, that's what they're going to choose,” he said.
