Aggregated uninsured residential flood exposure across the US could exceed $375 billion under a 1‑in‑100‑year flood scenario and rise to more than $1 trillion in rarer, high‑severity events, according to new research.

Rating agency Moody’s has published a new whitepaper which highlights a widening gap between growing flood risk and insurance coverage that is transferring financial strain to households, local governments, and public balance sheets nationwide.

The publication explained: “Flood risk is a growing credit challenge for US state and local governments, given increased frequency and severity of flooding events, residential development in flood zones, and limited insurance coverage. This Moody’s report quantifies potential insurance protection gaps at the county level under different scenarios to provide a forward-looking view of risk exposure.

“Per Moody’s Ratings, residential flood exposure poses significant credit risk to US state and local governments, including through rising property insurance costs, declining property values and the need for extensive investment in climate-resilient infrastructure.”

Moody’s conducted a nationwide analysis of residential flood risk in the US using the Moody’s RMS US Inland Flood HD model, illustrating different scenarios of potential uninsured flood losses at the county level as the flood footprint expands.

The scenarios included a 1-in-100-year flood (the Federal Emergency Management Agency [FEMA]’s threshold for federally regulated flood insurance);  a more extreme 1-in-500-year flood; and  a 1-in-100-year flood in an intermediate-emissions scenario by 2050.

All scenarios assume insurance coverage remains static with no additional investment in flood defences, indicating current structural exposure rather than a forecast of realized losses.

• US counties face high flood insurance protection gaps in a 1-in-100-year flood scenario with nationwide aggregate uninsured loss exposure of $375 billion and a 65% protection gap. Estimates reflect aggregated potential loss exposure across US counties, rather than losses from a single nationwide flood event. Counties with the largest potential uninsured losses – greater than $5 billion – are concentrated in Florida, Louisiana, South Carolina and Texas, all states with moderate-to-high credit exposure to physical climate risk.
• The concentration of risk is clear when considering Moody’s analysis that although 90% of counties are exposed to some level of flood risk and generally have high insurance protection gaps, the magnitude of their potential uninsured loss exposure is relatively small at $150 million or less per county. This can reflect lower flood hazard in the region, lower residential exposure, or both.
• As the flood footprint expands in rarer 1-in-500-year events, nationwide uninsured loss exposure could triple to over $1 trillion, with a more than 70% protection gap. Counties with potential uninsured losses above $5 billion extend to 11 states beyond the Gulf and Atlantic coasts, including some with low exposure to physical climate risk.
• Under an intermediate-emissions scenario, uninsured loss exposure could increase by about 25% on average by 2050, to around $472 billion. This is not a forecast, but a stress scenario analysis to illustrate how flood risk and insurance gaps might evolve. Counties with potential uninsured losses above $5 billion would expand to one more state beyond the 1-in-100-year flood scenario, in New Jersey, but remain within states with moderate-to-high credit exposure to physical climate risk.
• The catastrophic flooding associated with Hurricane Helene in Asheville, North Carolina, in September 2024 illustrates how extreme precipitation can significantly exceed historical levels, resulting in uninsured losses for households and businesses under various severity scenarios. Recent events in other regions have also illustrated risk exposure from record rainfall in short time periods that can breach even rarer 1-in-1,000-year rainfall return periods.
• High insurance protection gaps in percentage terms can signal pockets of high risk exposure, but it is ultimately the magnitude of such uninsured losses and a county’s ability to absorb such shocks through federal disaster aid, state and local resources, liquidity and revenue, insured loss proceeds, and the strength of governance frameworks, that will determine credit impact.
• Uninsured loss exposure ratios (potential uninsured loss to replacement cost values) provide an added lens to analyse risk exposure. Counties with the largest potential uninsured losses do not always have the highest uninsured loss exposure ratios. This means that even in counties where the magnitude of losses may not be as high, they may still be significant for that particular county; conversely, for some counties, high uninsured loss exposure in absolute terms may reflect a relatively small share of the county’s overall residential base.

The report added: “Flood risk is no longer confined to a small number of coastal hotspots. While a limited share of counties accounts for the largest potential uninsured losses, most U.S. counties face some level of flood exposure and high insurance protection gaps, posing rising credit risks for local governments.”