The market for privately written inland flood insurance in the United States is growing rapidly, but flood modeling is still in its infancy. As a result, underwriters need to be aware of the differences that exist among commercial flood models, experts agree.

Executive Summary

Insurers have to use U.S. flood models if they want to start writing private flood risk, but the models are in the early stages of development and output can vary. As a result, underwriters need a deep understanding of how the models work and their limitations.

“Flood models are hugely important in making private flood viable and making it possible to do a proper job of setting rates,” said Nancy Watkins, principal and consulting actuary at actuarial and consulting firm Milliman, who is based in the company’s San Francisco office.

“Insurers have to use these models if they want to start writing private flood, measuring their risk or even evaluating it,” she emphasized. “But they need to be cautious consumers of the information.”

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