Measuring flood underinsurance in the USA

Natee Amornsiripanitch, Siddhartha Biswas (), John Orellana-Li and David Zink
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Natee Amornsiripanitch: Federal Reserve Bank of Philadelphia
Siddhartha Biswas: Federal Reserve Bank of Philadelphia
John Orellana-Li: Federal Reserve Bank of Philadelphia
David Zink: Federal Reserve Bank of San Francisco

Nature Climate Change, 2025, vol. 15, issue 9, 971-977

Abstract: Abstract Flood insurance could mitigate the negative shock from climate-induced disasters, yet many households are still not covered. Here, using data on expected flood damage and National Flood Insurance Program policies, we provide estimates of annual flood risk protection gaps and underinsurance among single-family residences in the contiguous USA. Annually, 70% (US$17.1 billion) of total flood losses would be uninsured. Underinsurance, defined as protection gaps among properties whose current coverage is under the optimal level, totals US$15.7 billion annually. Among at-risk households, 88% are underinsured and average underinsurance is US$7,208 per year. Underinsurance persists both inside and outside the Federal Emergency Management Agency’s special flood hazard areas, suggesting frictions in the provision of risk information and regulatory compliance. Underinsurance falls disproportionately on low-income communities. At least 70% of at-risk households would benefit from purchasing flood insurance, even as prevailing prices rise.

Date: 2025
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DOI: 10.1038/s41558-025-02396-w

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