Private flood leaders say market is ready to absorb NFIP policies but urge gradual transition

Private flood insurers say they are prepared to take on the bulk of the federal government's flood insurance portfolio if Washington moves forward with proposed reforms, though industry leaders cautioned that a poorly managed handoff could destabilize a market still structurally dependent on the National Flood Insurance Program.

The comments came after the Federal Emergency Management Agency Review Council, an advisory body created last year to guide the administration on disaster policy, released a report recommending a gradual, ​voluntary shift of NFIP policies to the private market. The council also called for a flood insurance marketplace giving consumers access to both NFIP and private options, and for continued implementation of Risk Rating ‌2.0 and updated flood maps.

Stephanie Lee, founder and CEO of Tampa-based MGA Titan Flood, said the private sector has the capacity to handle the majority of the federal book. "We think we can collectively carry about 85% of the risk out of the NFIP," she said.

Trevor Burgess, chairman and CEO of Neptune Flood, a St Petersburg-based MGA with more than 300,000 customers and $400 million in premium backed by seven carriers and 35 reinsurance partners, said approximately 95% of NFIP policies would qualify for his company's coverage. He added that roughly half of those policyholders could save money by switching.

"If ​1.7 million of them could save money by switching, that seems like a pretty no-brainer opportunity to help save Americans money," Burgess said.

The NFIP had 4.5 million policies in force as of April 30, 2026, a fraction of ​the population at risk.

FEMA estimates roughly 13 million U.S. homes sit in high-risk flood zones. A recent University of Alabama study put the number of people at very high coastal ⁠flood risk at 17.5 million, with another 17 million in high-risk areas. FEMA's own claims data shows 29% of NFIP claims between 2014 and 2024 went to properties outside designated high-risk zones.

Tom King, flood line underwriter at Hiscox, said the scale ​of U.S. flood risk has outgrown the federal balance sheet. "A voluntary take-out approach preserves consumer choice while allowing private capital to play a more meaningful role and reduce pressure on the NFIP," he said.

A SMOOTH TRANSITION NEEDED

Brad Turner, vice president and national product ​manager for flood at Burns & Wilcox, offered a more measured view. While encouraged by the report's direction, Turner said the private flood market remains structurally reliant on the NFIP and is not positioned for an abrupt changeover.

"The private market doesn't exist without the NFIP right now. Pulling the plug abruptly is the thing I worry about," Turner said. "They need a smooth transition."

Turner identified the Gulf Coast, Louisiana and parts of New York as markets where private appetite has historically been thin. He also flagged properties with severe, repetitive loss histories as a category the private market ​has largely avoided and would need to reconsider at scale.

"There are going to be pockets where it's going to be difficult," he said, adding that the council's approach to subsidies could help unlock new private capacity by making more risk commercially ​viable.

With proper planning, Turner said the private market could ultimately handle the vast majority of what the NFIP currently does. "If there's proper planning and a transition period that's appropriately handled, I think it absolutely could take care of 90% of what the NFIP does," he said.

Burgess ‌and Lee both ⁠acknowledged that a residual public role would remain necessary.

Burgess said roughly 5% of NFIP policies, often properties built specifically because of subsidized federal coverage, would not qualify for private coverage and would need to remain in a public program. "If people want to keep the NFIP, they should be able to keep the NFIP,” he said.

Lee said the more immediate challenge may be behavioral rather than financial, with agents and brokers long accustomed to routing clients through the federal program.

"It's just a retraining issue," she said. “When you have agencies and distribution partners who are used to working with the NFIP, sometimes they don't give a second thought to trying a different marketplace.”

Burgess said Neptune has spent the past year building out its technology and underwriting capabilities in anticipation of ​potential legislative action that could accelerate policy migration from the ​NFIP. "We want to make sure we're positioned appropriately in ⁠case something happens with the NFIP," he said.

New York-listed Neptune Insurance Holdings' stock closed up 22% on May 7 after the panel released its recommendations.

In a research note, Piper Sandler analysts said Neptune is the largest private flood insurer "so would potentially benefit from reform of the flood insurance market that encourages private insurance."

PRIVATE MARKET ‘READY AND BETTER PREPARED’

Neptune has often called for NFIP reform. In ​a research paper in October last year, it noted that the NFIP was $22.53 billion in debt, including a $2 billion increase in 2025, and said “every new policy sold adds risk to ​the U.S. taxpayer.”

“The NFIP continues to ⁠take on risks that the private market is ready and better prepared to manage,” the paper said.

Neptune said under FEMA’s Risk Rating 2.0 system, new NFIP customers already pay full risk-based premiums with no subsidies but that many long-time policyholders are still shielded by annual caps of up to 18%, which keep their rates below actual risk levels.

The paper suggested a “steady transition” that would naturally shrink NFIP’s role.

“Within about seven years, NFIP would be reduced to a smaller ‘last resort’ program, covering only the hardest-to-insure properties, roughly 150,000 to 200,000 ⁠policies nationwide,” it ​said.

AM Best in a report also released in October last year noted the NFIP’s share of U.S. flood premium had fallen to 73% by the ​end of 2024, having accounted for 87% in 2016.

The report said that “the private market still provides the decidedly lesser proportion of total available flood coverage, and private insurers remain selective in the risks they underwrite.”

But AM Best said additional private insurance options have emerged over the past decade.

“It has largely been ​driven by changes to the NFIP and its Risk Rating 2.0 program, along with improved analytics and models that facilitate more granular risk assessments for individual policies, and models augmenting the ability of private carriers to effectively underwrite flood risks,” the report said.