Moody's: A 1-in-100-Year US Flood Could Cause More Than $375 Billion in Uninsured Losses, With a 65% Protection Gap

Most of the cost of a major American flood would not be paid by insurance, according to a whitepaper from Moody's. The analysis, reported by Insurance Journal and Insurance Business, estimates that a flood with a 1-in-100-year likelihood could cause more than $375 billion in aggregated uninsured losses in the United States. The gap between flood risk and flood insurance take-up is currently 65%. This article summarises the Moody's findings as reported. An earlier version of this article described the $375 billion as total flood damage. The figure is the uninsured portion of residential losses, and the article now says so. The analysis used the Moody's RMS US Inland Flood HD model to assess residential flood risk, so it does not cover commercial property.

What are the main estimates? For a 1-in-100-year event, which has a 1% chance of occurring in any given year, uninsured losses exceed $375 billion and the protection gap is 65%. For a 1-in-500-year flood, uninsured exposure could exceed $1 trillion, with a 70% protection gap. Moody's also projects that uninsured exposure from a 1-in-100-year event could rise about 25% on average by 2050, to roughly $472 billion. The protection gap here means the share of the economic loss that is not covered by insurance. A 65% gap means that, on average, about two-thirds of the damage in such an event would be uninsured, in Moody's modelling.

Where is the exposure concentrated? The whitepaper says that under the 1-in-100-year scenario, most counties' uninsured exposure is manageable as a share of replacement cost. However, fewer than 2% of counties in 11 states hold 65% of national uninsured exposure. Counties in Florida, Louisiana, South Carolina and Texas face more than $5 billion each in potential uninsured losses, with protection gaps in these areas ranging from 45% to 75%. The whitepaper also uses Hurricane Helene as an example: Asheville, North Carolina, saw rainfall far above the amount expected for a 1-in-1,000-year event, and the protection gap in Buncombe County was 88%.

Who provides flood cover? The National Flood Insurance Program (NFIP) provides most residential flood coverage in the United States, and private flood insurance is about 10% of the market. Homeowners policies generally exclude flood damage, so people need a separate policy. Lenders require flood insurance for mortgaged properties in designated high-risk areas, which relies on FEMA's maps.

Why are the maps a problem? Moody's says that FEMA Special Flood Hazard Area maps, which mortgage underwriters use to set insurance requirements, are based mainly on riverine flooding. They generally do not reflect storm surge, sea-level rise or extreme precipitation, so losses can occur outside mapped zones. People living outside a mapped high-risk zone may not be required to buy flood insurance and may not realise they are at risk. The whitepaper warns that relying solely on backward-looking statistics has risks and limitations for flood risk in a changing hydroclimate.

What are the implications? First, for households: an uninsured flood loss can be financially devastating, with repair costs paid from savings, loans or disaster assistance. Second, for governments: large uninsured losses often lead to disaster aid, which means taxpayers carry part of the risk. Third, for lenders and the housing market: damaged properties can lead to defaults and falling values. Fourth, for insurers and modellers: the case for private capital and better risk models, such as the one used in the study, is stronger when public maps and statistics fall short. These are broad implications drawn from the logic of the findings and are not all stated in the whitepaper.

Is this consistent with other reports? On this site, Triple-I and Munich Re's RiskScan report estimated a global protection gap, and Canadian insurers have been urging action on flood and wildfire resilience. They address different geographies and use different methods, so their numbers should not be added together. Moody's is a credit rating agency and model vendor, and it sells risk analytics, so readers should be aware of its commercial interest.

What can households do? Check flood risk using multiple sources, not only the FEMA map; ask an insurance agent about NFIP and private flood policies, including waiting periods; consider mitigation such as elevating utilities and using flood-resistant materials; and keep documents and photographs for any claim. Many policies take effect only after a waiting period, so buying cover before flooding is expected is important.

What does a 65% protection gap say about behaviour? Take-up is low partly because many homeowners believe their standard policy covers flood, and partly because those outside mapped zones are not required to buy it. Premiums for flood cover also vary and, for the NFIP, depend on federal rating methods that the whitepaper does not discuss. The study identifies where gaps are widest, which could help target outreach, mitigation funding or private-market products, though it does not recommend specific policies.

What are the limits of the study? It is a model-based estimate of residential losses for hypothetical events, so actual outcomes could be higher or lower. The figures cover aggregated losses across the country in a single scenario, which would not occur in one flood but across many events with the same return period. Readers should treat the numbers as indicators of scale and not as predictions.

This article summarises a published analysis and is general information, not insurance or investment advice.