The Lender-Placed Flood Insurance Market for Residential Properties

by Dixon, Lloyd; Clancy, Noreen; Bender, Bruce; Ehrler, Patricia K.

• ISBN13: 9780833041555
• ISBN10: 083304155X
• Format: Paperback
• Copyright: 2007-05-19
• Publisher: RAND Corporation

Summary

The National Flood Insurance Program (NFIP) provides the majority of flood insurance on U.S. residential properties. While insurance agents sell nearly all NFIP policies through private insurance companies, the U.S. government still underwrites them. Flood insurance is also available from private insurers that underwrite it themselves. This report provides information about the size of the private market and compares private with NFIP policies.

Table of Contents

Introduction	p. 1
The National Flood Insurance Program	p. 2
Overview of the Private Market for Residential Flood Insurance	p. 3
Voluntarily Purchased and Lender-Placed Private Flood Insurance	p. 3
Actors in Lender-Placed Market	p. 4
Previous Analysis of the Market Penetration Rate and the Number of Lender-Placed Policies	p. 5
Organization of This Report	p. 6
Study Methods	p. 7
Sample Selection and Response Rates	p. 7
Insurer Sample	p. 7
Lender Sample	p. 8
Tracker Sample	p. 9
Survey Procedures	p. 9
Methods for Estimating the Number of Lender-Placed Policies	p. 10
Projections Based on Insurer Data	p. 10
Projections Based on Lender Data	p. 10
Projections Based on Tracker Data	p. 12
Characterizing Uncertainty	p. 13
Size of the Lender-Placed Market for Residential Properties	p. 15
Market Size Based on Insurer Data	p. 15
Market Size Based on Lender Data	p. 16
Market Size Based on Tracker Data	p. 17
Implications	p. 17
Procedures for Force-Placing Flood Insurance Policies and the Features of Private Policies	p. 21
Process for Issuing Lender-Placed Policies	p. 21
Lender Coverage Requirements	p. 23
Comparison of Private Policies and Policies Available Through the Mortgage Portfolio Protection Plan	p. 24
Administrative Features	p. 25
Risks Covered	p. 29
Losses Covered	p. 29
Policy Premiums	p. 31
Stakeholder Perceptions of the Advantages of the Private Market	p. 33
Conclusions	p. 37
Magnitude of the Private Residential Flood Insurance Market	p. 37
Comparison of Private and NFIP Policies	p. 38
Perceptions of the Advantages of the Private Market	p. 38
Role of Private Insurers	p. 39
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