Flood insurance

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The current situation

Flood warning: Working to provide better coverage

Flood risk continues to be one of the most difficult perils to price for the homeowners insurance industry, and until recently many have considered it to be uninsurable. As a result, flood insurance in the U.S. has traditionally been offered primarily through the National Flood Insurance Program (NFIP), operated under the auspices of the Federal Emergency Management Agency (FEMA), and a few private insurers. However, recent legislation - coupled with improved flood risk modeling, reinsurance and insurance market capacity, and consumer demand - is making the possibility of a private flood insurance market more viable.

Flood creates more losses than any other natural catastrophe peril, but is one of the least insured perils. In recent events, most of the people who had a flood loss were not covered by flood insurance.

Estimated percent uninsured during recent loss events

Between 60% and 99% of those affected by five recent catastrophes did not have flood insurance

Flood risk varies over short distances, and a successful risk classification plan needs to accurately price this risk. Milliman is one of the first companies to develop sophisticated flood insurance solutions and has extensive experience addressing the challenges inherent in this work.

What we do

Milliman is at the forefront of innovation in flood insurance.

  • Concurrent with the recent developments in flood insurance modeling and data availability, our consultants have developed independent flood rating and underwriting structures for private insurers.
  • We are recognized global experts in property insurance ratemaking, with specialists to help insurers measure and manage the unique risks associated with catastrophe-exposed property risk.
  • We employ competitive analysis to support pricing and profitability decisions, and sales and marketing strategies.
  • Our experts are experienced in assessing and navigating the regulatory landscape. For admitted carriers, the ability to underwrite and price flood insurance profitably is dependent on state regulation, which varies widely across the US.
  • We can assist with the implementation of catastrophic rating plans. We can create manuals and GIS layers, and assist with IT issues that may arise.
  • Our team has performed in-depth statutory research and feasibility studies for insurers and reinsurers considering entering the flood insurance market.
  • We have extensively reviewed storm surge catastrophe models and inland flood models, and have developed a variety of approaches to the area of flood insurance rate structures.
  • Our consultants are recognized as thought leaders in flood insurance, and have presented on catastrophic risk rating and flood rating at numerous industry conferences. We are currently providing actuarial consulting services as part of a program to redesign flood insurance products across the NFIP.

Our tools


Pixel™ is a web-based, interactive premium comparison platform that helps companies quickly understand their rating positions and make informed decisions. The software incorporates:

  • Market baskets (see below) or company-specific data, such as quotes
  • Competitor premiums and modeled losses at the risk level
  • Geospatial information and maps
  • Data exploration and visualization
  • Advanced analytics

Test sensitivity of key metrics to assumptions

Example: Win Rate by Permissible Loss Ratio


Flood pricing structures

NFIP clone Risk-level modeling
Grid rating plan Refined rating plan

Market Baskets

To reduce time and data required to enter the flood arena, Milliman has developed market baskets. These are portfolios of hypothetical risks with realistic distributions of characteristics used for property and flood insurance pricing. They include:

  • Data on realistic properties with location-level specificity
  • Critical risk factors based on advanced geospatial measurements
  • Competitor premiums and catastrophe model losses for selected states/products

Relative elevation measures whether a point is higher or lower than the surrounding area

Rating engine

Milliman is familiar with the current NFIP rating plan and has developed a rating engine that can be used to calculate NFIP premiums for a portfolio of policies based on specified rating characteristics. Further, we have extensive competitive data on homeowners premiums, which can be used to assess the premium increase to policyholders of adding a flood endorsement.

Using these tools, we can perform extensive market feasibility studies to test the competitiveness of proposed rating and underwriting alternatives and reduce the risk of new program implementation.

Modeled loss ratios by segment


Milliman can assist with the implementation of catastrophic rating plans, including creating manuals, understanding and managing policyholder dislocation, creating GIS layers, and assisting with IT issues that may arise. Milliman offers PinPoint, a cloud-based application program interface that takes a latitude/longitude and returns GIS-based variables in real time. This provides our customers a cost-effective alternative to the incorporation of custom GIS layers into existing systems.

Next Steps

For more information, contact: