Approximately 3,800 towns and cities in the U.S. are located on floodplains and many areas off floodplains are still prone to flood damage and loss. Headlines for the month of August 2021 alone reflect major flooding in the U.S. following both Hurricane Ida and Tropical Storm Henri, as well as additional serious flooding in Arizona, Nebraska, New York, North Carolina, Tennessee, and Utah.
The United States has multiple characteristics that affect the region's propensity for flooding, including climate, weather patterns, topography, and land cover, among others. Damaging floods due to rainfall occur along many of the major rivers. In mountainous regions, flash floods are common and carry water to the lowlands through numerous medium and major rivers such as the Missouri, Ohio, and the Mississippi rivers.
Significant risk can exist even in areas with a high level of flood mitigation, particularly in the event of a flood defense failure. Flood disaster declarations are not uncommon, even in regions well equipped to mitigate risk and manage recovery.
In recent years, catastrophe models have evolved to aid the growing private flood insurance market in developing actuarially sound rates and risk transfer mechanisms, which are both critical components of healthy insurance markets. In this AIR Currents article, our experts provide an overview of the U.S. flood insurance landscape, share high-level estimates of the industry loss potential from all sources of flooding based on extreme event models, and highlight how Verisk solutions can be used to support the expansion of the flood insurance market.