The U.S. faces a widening hole between rising flood threat and the take-up of flood insurance coverage, doubtlessly exposing the nation to greater than $375 billion in aggregated uninsured flood losses from a 1-in-100-year occasion, in accordance with a brand new whitepaper from Moody’s.
The rising insurance coverage safety hole, now at 65%, poses a major monetary threat to households and native governments, which have lengthy relied on FEMA Particular Flood Hazard Space (SFHA) maps based totally on riverine flooding, and customarily don’t account for flood threat from storm surge, sea stage rise or excessive precipitation, the Moody’s report stated. This exposes counties to losses that may happen outdoors of mapped FEMA flood zones, added Moody’s.
Mortgage underwriters use FEMA SFHA maps to find out if a property wants to hold flood insurance coverage, which is primarily supplied to U.S residences by the Nationwide Flood Insurance coverage Program. In accordance with Moody’s, personal flood insurance coverage represents about 10% of the market.
“Uninsured losses come up not from remoted outliers, however from persistent gaps between increasing flood hazards – significantly past regulatory flood maps that dictate mortgage necessities, in addition to rarer, high-severity occasions – and insurance coverage take-up,” Moody’s concluded.
The interactive whitepaper analyzed residential flood threat within the U.S. utilizing the Moody’s RMS US Inland Flood HD mannequin, together with situations of a 1-in-100-year flood and a extra excessive 1-in-500-year flood, which may lead to uninsured loss publicity of greater than $1 trillion with a 70% safety hole.
In a 1-in-100 year-flood state of affairs, most counties’ uninsured loss publicity is manageable as a share of property alternative price, the whitepaper discovered. A 1‑in‑100‑12 months flood is a flood occasion that has a 1% likelihood of occurring in any given 12 months.
In such a state of affairs, lower than 2% of counties in 11 states carry 65% of the nation’s uninsured loss publicity. Counties in Florida, Louisiana, South Carolina and Texas face greater than $5 billion in potential uninsured losses within the occasion of a 1-in-100-year flood. Safety gaps vary from 45%-75%, Moody’s discovered.
Flood occasions usually are not contained to 1-in-100-year and even 1-in-500-year situations.
Asheville, North Carolina skilled rainfall far above the anticipated rainfall from a 1-in-1,000-year occasion when Hurricane Helene hit in September 2024. Buncombe County, the house county of Asheville, had a flood insurance coverage safety hole of 88%, Moody’s RMS mannequin outcomes point out.
The divergence of doubtless catastrophic flood occasions and low flood insurance coverage take-up “highlights the dangers and limitations of relying solely on backward-looking statistics to characterize flood threat in a altering hydroclimate, significantly for brief‑period, excessive‑depth rainfall occasions,” the whitepaper states.
Moody’s discovered that uninsured loss publicity from a 1-in-100-year flood occasion may improve nationwide by about 25% on common by 2050, to round $472 billion.
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