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Lloyds: Harvey Showed Flood Underinsurance

Lloyd’s of London reports that the stark flood insurance protection gap for many U.S. communities was brought to light by the flooding in Houston.
June 12, 2018

Lloyd’s of London reports that the stark flood insurance protection gap for many U.S. communities was brought to light by the flooding in Houston caused by Hurricane Harvey last August. According to the “After the Storms” report, economic inland flood losses from Harvey reached $75 billion, but insured losses ranged from $25 billion to $35 billion, which Lloyd's attributed to the fact that flooding typically is not covered by standard homeowners and renters insurance policies.

Uptake of flood insurance through the National Flood Insurance Program (NFIP) remains low, with only 12 percent of U.S homeowners carrying flood insurance and 80 percent of Houston residents lacking appropriate coverage. The Lloyd’s research shows that NFIP flood maps are often out of date or occasionally even politicized, which makes it more difficult to price risks and encourages individuals to live in flood-prone areas. Lloyd’s suggests that private insurers could play a larger role in pricing risk, building resilience, and increasing insurance penetration in the U.S flood market, but providing broad coverage would remain difficult.  

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