AM Best Predicts Brighter Future for Private Flood Insurance

Hurricane Ian is going to give the National Flood Insurance Program (NFIP) another black eye. Predictions from AM Best says losses will be between $3.5 billion and $5.3 billion.

That’s going to add more burden to the NFIP’s current $20.5 billion debt.

CoreLogic has a totally different prediction. It says flood losses from the September hurricane will be between $8 billion and $18 billion.

AM Best just did a report on private flood insurance and its relationship to the federally insured NFIP. The report is titled, NFIP Adrift but Private Flood Insurance Gains Traction. That traction is a direct written premium increase of 42% for private flood insurers.

Part of that jump has to do with the implementation of FEMA’s Risk Rating 2.0. It started charging actuarily sound rates for flood insurance. At the same time, FEMA and the NFIP — via Risk Rating 2.0 — allowed private flood insurers to enter the market.

“The full effect of Risk Rating 2.0 has not yet been reached,” AM Best’s report said. “Premium increases are capped at 18% a year on single family primary residences. Based on the limitations on incremental rate increases, the flood premium for many homes will not reach their full actuarially sound rate for another four years.”

Source link: Insurance Journal — http://bit.ly/3AR5h5e