The images and evident suffering are all too familiar. Local economies will eventually recover, but the human impact is all too real.

A “bomb cyclone” batters the region, as more than 650 Nebraska residents rush to shelters while water rescues begin. Historic flooding is blamed for at least three deaths in Nebraska and Iowa. And a swelling Missouri River topples levees, causing enormous damage to local infrastructure.

The storm that recently devastated the Midwest caused flood damages estimated at more than $1 billion in Nebraska. That included around $450 million in damage to roads, levees and other infrastructure and another $440 million in crop losses. More than 2,000 homes and 340 businesses were damaged or destroyed by the flood.

The truth is that floods have always been a large risk in the U.S. Now storms are getting more severe. And yet, only one in six American homes has flood insurance. Flood recovery happens slowly and inevitably, but it’s governments and ultimately the taxpayer that pick up much of the bill.

Making a bad situation worse, many people think they are covered by their homeowners' policy — but they usually aren't.

The majority of flood insurance in the U.S. today is provided by the National Flood Insurance Program (NFIP), which is a government-backed protection for homeowners and businesses across the country.

As a proud supporter of the NFIP, we’ve come to realize that the private market has the potential to play a key role in improving the American flood protection system going forward. We believe private insurers can lift the burden from stretched federal and local budgets.

As the U.S. experiences typical economic losses of $15 billion from flooding annually (of which only $5 billion is insured), it's clear that a long-term solution is badly needed for the "flood protection gap."

We believe a private-market solution can offer some new answers. For starters, insurers now understand and can evaluate the risk better. Just a generation ago, you needed to survey every home to even contemplate a flood-risk assessment; nowadays, satellites, digital elevation models and historical flood data help us understand a peril once thought uninsurable.

In fact, last year was a landmark year for private-market flood coverage. The elusive dream of covering “uninsurable” flood peril was finally realized via an offering from Florida insurer Security First. This flood product, which was backed by advanced modeling from Swiss Re, enabled Security First to offer its 350,000 customers the ability to tie flood coverage in with existing wind protection for one comprehensive policy.

This product demonstrated the demand for private-market solutions in flood, with the insurer writing 12,500 policies in the first five months — with room to grow.

Florida makes sense as an early adopter for private flood insurance. But the potential for the additional development of private-market solutions extends wherever flood risk is prevalent, including here in the Midwest.

The risk of flooding is here to stay. But for the first time, the desire for improved flood coverage is met with a true blueprint for a private-market solution. Recovery funding will need to come from somewhere moving forward. It’s time for the private-insurance industry to step up to fulfill their potential as a source of financial support for Americans.

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Keith Wolfe is president of property and casualty at Swiss Re Americas. He lives in Annapolis, Maryland.



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