By Rob Fischer
Policy Project Manager, Casualty
If you are a relatively new homeowner like myself, you’ve recently discovered that toward the end of a long exhausting process of finding, bidding on, and closing on a home, you are then required to learn about what kind of homeowner’s insurance coverage you will need. What you may not realize, as I didn’t, is that your homeowner’s insurance does not insure you against flooding caused by storm surge or rising waters in your neighborhood.
That’s where flood insurance comes in. For those who live in close proximity to a body of water, purchasing flood insurance may be another requirement before closing on a new home. The majority of flood insurance policies are written by the National Flood Insurance Program (NFIP), a federal insurer within the U.S. Department of Homeland Security administered by the Federal Emergency Management Agency (FEMA). Those who live in flood-prone areas are often required to purchase flood insurance. However, just because you don’t live in a flood-prone area doesn’t mean you are not at risk of flooding. Flooding is one of the costliest natural hazards, yet many homeowners remain uninsured against it.
As it stands, the NFIP is not considered actuarially sound. Since 2005, it has been paying out more in claims than it has collected in premiums. In 2021, Risk Rating 2.0 went into effect seeking to address the funding shortfall in the program by raising policyholders’ premiums in an effort to cover their property’s real risk level. This, however, has led to increased affordability challenges as premiums for existing policyholders rise each year until they reach their true full risk level.
The NFIP is funded by Congress. Lawmakers have passed 33 short-term reauthorizations of the NFIP since 2017, with the most recent long-term reauthorization occurring in 2012 under the Biggert-Waters Flood Insurance Reform Act. A long-term reauthorization with reforms to address funding challenges has bipartisan support in Congress—though agreeing on which reforms to include remains a sticking point.
At the start of President Trump’s second term, he signed an executive order creating the Council to Assess the Federal Emergency Management Agency. The council released its final report containing its recommendations in May 2026. The council’s policy recommendations follow the doctrine of, “Disaster response should be locally executed, state or tribally managed, and federally supported.” On the NFIP, the report called for a number of strategic changes including:
- Modernizing risk data through continued implementation of Risk Rating 2.0 and revising flood maps to inform the American people about their true risk.
- Implementing risk-based pricing and actual costs.
- Shifting more coverage to the private insurance market through depopulation of existing NFIP policies.
The first two points are widely agreed on by lawmakers from both sides of the political aisle. However, there is some skepticism about how strong a private flood market can be, given that flood insurance is not required for all homeowners and major floods are becoming more frequent and costly in the United States.
Before the COVID-19 pandemic, the Casualty Practice Council’s Extreme Events and Property Lines Committee released an annual flood monograph which focused on the challenges that NFIP experienced from an actuarial perspective. It’s been many years since the last update and much has changed in the flood insurance landscape. The committee is planning to publish an updated flood monograph in 2027.
Actuaries will play a central role in shaping the data, models, and policy frameworks needed to support the NFIP under the new trajectory laid out by the Trump administration. For individual homeowners, these changes will determine whether flood insurance remains both available and affordable. For more information about these issues, visit the Academy’s casualty website and our climate change page.