Nationwide, only 20% of American homes at risk for floods are covered by flood insurance. Most private insurers do not insure against the peril of flood due to the prevalence of adverse selection

, which is the purchase of insurance by persons most affected by the specific peril of flood.In traditional insurance, insurers use the economic law of large numbers to charge a relatively small fee to large numbers of people in order to pay the claims of the small numbers of claimants who have suffered a loss. Unfortunately, in flood insurance, the numbers of claimants is larger than the available number of persons interested in protecting their property from the peril, which means that most private insurers view the probability of generating a profit from providing flood insurance as being remote.

However, there are insurers such as Chubb, AIG/Chartis, Fireman’s Fund that do provide privately written primary flood insurance for high value homes and The Natural Catastrophe Insurance Program underwritten by Certain Underwriters at Lloyd’s which provides private primary flood insurance on both low value and high value buildings