Come Rain or Shine: Evidence on Flood Insurance Purchases in Florida


  • The authors can be contacted via e-mail: and We would like to thank Neil Doherty, Martin Grace, Robert Klein, Howard Kunreuther, Edward Pasterick, Mark Pauly, Tim Scoville, Richard Zeckhauser, and two anonymous referees for insightful discussions on the market for catastrophic risks, the operation of the National Flood Insurance Program (NFIP), and their comments on previous versions of this article. Support from the Wharton Risk Management and Decision Processes Center, the AXA and EDF chairs at the Department of Economics of the École Polytechnique (France), the Climate Decision Making Center located in the Department of Engineering and Public Policy (cooperative agreement between the National Science Foundation (SES-0345798) and Carnegie Mellon University), and a grant from the Federal Emergency Management Agency Preparedness Policy, Planning and Analysis Division in the National Preparedness Directorate, U.S. Department of Homeland Security (Grant No. 2008-GA-T8-K004) is acknowledged. The views and opinions expressed are those of the authors and should not be interpreted as representing these organizations.


This article provides a detailed analysis of the operation of the National Flood Insurance Program (NFIP) in Florida, which accounts for 40 percent of the NFIP portfolio. We study the demand for flood insurance with a data set of more than 7.5 million NFIP policies-in-force (the largest ever studied) for the years 2000–2005, as well as all NFIP claims filed in Florida. We answer four questions: What are the characteristics of the buyers of flood insurance? What types of contracts (deductibles and coverage levels) are purchased? What are the determinants of claims payments? How are prices determined and how much does NFIP insurance cost?