A "No-regrets" Plan for Managing Flood Risk

Why Communities Need a Flood Insurance Strategy That Works Under Any NFIP Future

The National Flood Insurance Program has been reauthorized 34 times since 2017 through short-term extensions. The current authorization expires January 30, 2026.

Let that sink in: 34 extensions in eight years. No long-term reauthorization since 2012.

Meanwhile, serious political forces are calling for NFIP’s elimination. Project 2025—the Heritage Foundation’s blueprint for federal restructuring—proposes winding down the program entirely. Risk Rating 2.0 has already pushed nearly 300,000 policyholders out of the program through premium increases that hit 18% annually and won’t stop until properties reach “full actuarial rates”—which for some means premiums 300% higher than today.

For municipal leaders and regional planning authorities, this creates a strategic dilemma with real stakes:

Do you continue investing in a federal flood insurance infrastructure that may not exist in recognizable form within years? Or do you start preparing for a privatized market that may never fully arrive?

The answer, I’ll argue, is neither. Instead, communities should invest in insurability—the underlying conditions that make risk transfer possible regardless of whether that transfer occurs through federal programs, private markets, or arrangements that don’t yet exist.

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What Is Insurability, and Why Does It Matter Now?

Insurability isn’t binary. It’s not just “can you get coverage or not.” It’s a continuum defined by how many barriers stand between a property and functional risk transfer.

Think of it as a stack of sequential preconditions—each one has to work for the next to matter:

The Six Layers of Insurability:

1. Technical Insurability — Can this risk be underwritten at all? Is it quantifiable, diversifiable, bounded?

2. Product Availability — Do insurance products exist that cover this specific risk, for this asset type, in this geography?

3. Accessibility — Can this specific property actually obtain coverage, given underwriting criteria and market restrictions?

4. Affordability — Is the premium affordable relative to the property owner’s economic capacity?

5. Demand/Take-up — Does the owner actually purchase the available coverage?

6. Protection Adequacy — Does the coverage purchased actually provide meaningful protection, given limits, deductibles, and exclusions?

Each layer is a potential point of failure. A risk can be technically insurable but have no products available. Products can exist but be inaccessible due to underwriting restrictions. Coverage can be accessible but unaffordable. Affordable coverage can go unpurchased. Purchased coverage can prove inadequate.

Here’s the key insight: Different insurance regimes—NFIP, private market, or hybrid—fail at different layers for different communities. But interventions that improve conditions at any layer create value regardless of which regime prevails.

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The Three Futures

Let’s look at how the insurability stack breaks under different scenarios:

Future A: NFIP Continues with Risk Rating 2.0

The program survives but premium escalation continues. What breaks?

• Technical & Availability: Strong—NFIP covers flood comprehensively

• Accessibility: Eroding—repeated lapses, tightening restrictions

• Affordability: Breaking—18%/year increases until full actuarial rates; 77% seeing increases

• Demand: Declining—300K+ policies already dropped; low-income households hit hardest

• Protection: Mixed—$250K building caps inadequate for many properties

Primary intervention points: Affordability assistance, demand activation, mitigation to reduce actuarial rates

Future B: Accelerated Privatization

NFIP winds down; private carriers take over. What breaks?

• Technical: Strong—private carriers use sophisticated modeling

• Availability: Uneven—expanding but geographically concentrated

• Accessibility: Breaking—cream-skimming leaves highest-risk properties unserved; 5%+ may face outright declinations

• Affordability: Variable—60% may pay less than NFIP full-risk rates; others pay significantly more

• Demand: Unknown—no mandatory purchase equivalent

• Protection: Potentially Strong—higher limits, broader coverage available

Primary intervention points: Market facilitation, residual risk mechanisms, disclosure and documentation infrastructure

Future C: NFIP Collapse/Lapse

Program lapses without replacement. What breaks?

• Everything, simultaneously. Private market can’t absorb 4.7 million policies overnight. Mortgage market freezes (1,400 transactions per day affected during past lapses). Average costs rise 64%+ without federal structure. Massive uninsured exposure emerges.

Primary intervention points: Emergency stabilization, state backstops, disaster assistance surge

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The Strategic Insight

Here’s what most communities miss: Most interventions that prepare you for private market dominance also improve outcomes under a reformed NFIP. The reverse is not true—pure NFIP optimization leaves you vulnerable if the program weakens.

This means there’s a “no regrets” strategy available. Invest in insurability itself—the underlying conditions—and you’re positioned for whatever comes.

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The No-Regrets Playbook

For Layers 1 & 2 (Technical Insurability, Product Availability)

Build property-level risk data infrastructure.

Both NFIP’s Risk Rating 2.0 and private carriers price at the property level. Better data enables better pricing regardless of source. This means:

• Elevation certificates for all properties in flood zones (not just those required for compliance)

• Building characteristic documentation (foundation type, first floor height, flood openings)

• Mitigation records that travel with properties

Address repetitive loss properties proactively.

These properties drive NFIP’s fiscal dysfunction and will be first declined by private carriers. Buyouts, elevation, and relocation aren’t just mitigation—they’re insurability infrastructure. The 2.5% of NFIP policies that account for nearly 50% of payouts are the properties that make insurance markets fail.

Exceed minimum floodplain standards.

Higher freeboard, stricter substantial improvement thresholds, better drainage. This reduces technical risk regardless of who provides coverage. It also generates CRS credits under NFIP while building the resilience profile private carriers will reward.

For Layer 3 (Accessibility)

Optimize your Community Rating System participation.

Only 6.6% of NFIP communities participate in CRS. This is massive underutilization of a tool that benefits residents under any scenario. CRS activities—disclosure requirements, higher standards, public outreach—build institutional capacity useful in any insurance market while generating premium discounts (up to 45%) today.

If your community is already in CRS, push for improvement. Most communities are Class 8-9; reaching Class 6-7 provides meaningful additional relief and demonstrates commitment that private carriers will notice.

Build private market relationships now.

Know which carriers operate in your region. Understand their underwriting criteria and appetite. Neptune, TypTap, and others are expanding in the Mid-Atlantic and Northeast. Communities with relationships will transition more smoothly if NFIP weakens.

For Layer 4 (Affordability)

This is where neither NFIP nor private markets will save you.

Risk Rating 2.0 is designed to reach actuarial accuracy—which means some properties face 300%+ premium increases over time. Private markets price accurately by definition. Neither regime solves affordability for low-income households.

This requires local/regional mechanisms:

• Means-tested premium assistance programs modeled on utility assistance and integrated with existing housing programs

• Resilience revolving loan funds that provide capital for mitigation investments, reducing premiums over time (addressing the root cause rather than subsidizing the symptom)

• Community-wide group purchasing to aggregate buying power

The communities that build affordability infrastructure now will be the ones that maintain coverage rates regardless of which insurance regime emerges.

For Layers 5 & 6 (Demand, Protection Adequacy)

Flood insurance take-up is shockingly low. Only 3.3% of U.S. households have NFIP coverage. Even in flood-prone areas, voluntary take-up is poor. Increasing awareness drives demand regardless of coverage source.

Most people don’t discover their coverage is inadequate until they file a claim. NFIP’s $250K building cap leaves many properties underinsured. Deductibles create effective gaps. Excess flood coverage exists but is underutilized. Coverage adequacy counseling—helping residents understand whether their coverage actually protects them—pays off under any regime.

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The Equity Imperative

Under both NFIP and private market scenarios, low-income households and communities of color face:

• Disproportionate premium burden (insurance costs as percentage of income)

• Higher drop rates (up to 13% of those facing highest increases dropped coverage)

• Disaster recovery gaps (without insurance, these households become disaster assistance dependent—and that assistance is inadequate)

• Housing stability threats (unaffordable insurance leads to mortgage default, forced sale, or abandonment)

Equity-forward insurability planning means:

1. Target mitigation investments to properties with highest premium burden relative to income

2. Use buyout programs proactively in areas where insurance will become unaffordable, with relocation assistance that preserves community ties

3. Build affordability mechanisms into resilience strategy from the start, not as an afterthought

4. Ensure disclosure requirements inform policy, not just protect buyers in transactions

The communities that address equity now will protect municipal budgets by avoiding the protection gaps that emerge when insurance markets—federal or private—price accurately.

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The Business Case

Every federal dollar invested in hazard mitigation saves six dollars when disaster strikes. But the return on insurability planning goes beyond avoided losses:

Real Estate Market Stability

• Properties in communities with strong insurability profiles maintain value better during insurance market disruptions

• Mortgage access depends on insurance access

• Transaction certainty attracts investment

Municipal Fiscal Health

• Insured communities recover faster with less fiscal strain

• Uninsured losses ultimately appear on municipal balance sheets

• Credit rating agencies are beginning to incorporate climate risk and insurance coverage

Economic Development

• Businesses evaluate insurance availability when making location decisions

• Insurability is becoming a competitive factor

• Communities that can demonstrate strong insurability profiles attract investment

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What This Means for Your Community

The federal flood insurance infrastructure may or may not survive the next decade in recognizable form. But communities that invest in insurability—the underlying conditions that make risk transfer possible—will be positioned to thrive under whatever regime emerges.

This means treating insurance not as a procurement line item, but as a lever of resilience. It means engaging insurers as strategic partners, not just end-of-pipeline providers. It means building the data, documentation, and institutional capacity that enables risk transfer regardless of source.

The communities that figure this out won’t just weather the NFIP uncertainty. They’ll emerge with stronger housing markets, more resilient residents, and better fiscal positions—regardless of what Congress does.

That’s the insurability planning imperative.

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InnSure is a nonprofit innovation hub focused on making insurance work for underserved communities facing climate risks. We help municipalities assess insurability, develop resilience strategies, and build the institutional infrastructure for functional risk transfer markets.

Questions? Reach out at info@innsure.org