Greater awareness of flood risk is failing to translate consistently into insurance purchases in New York and New Jersey, as affordability pressures and misconceptions about exposure complicate agents’ efforts to keep clients covered.
The two states logged nearly 50,000 fewer National Flood Insurance Program policies in August 2026 than when Superstorm Sandy struck in 2012, according to a new Moody’s analysis. Combined enrollment fell 12.2% over that period, while population grew approximately 4%.
The figures raise questions about whether insurance protection has kept pace with flood exposure despite substantial investment in defenses. At least one agency leader said clients are paying closer attention to flooding but weighing coverage against other insurance costs.
“We're seeing clients become more conscious of flood exposure, but that awareness doesn't always translate into a willingness to purchase or maintain coverage,” Larry Stanney, president of Paris Kirwan Associates, Inc., told Insurance Business. “Affordability is a major factor, particularly when clients face increases across multiple insurance lines.”
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New York had 163,156 NFIP policies in force in August, down approximately 5,844, or 3.5%, from 2012. New Jersey had 192,559, a decline of 43,441 policies, or 18.4%, according to Moody’s.
The retreat continued this year. New York’s policy count fell by 5,044, or 3%, while New Jersey lost 6,283 policies, or 3.2%.
“Private flood insurance is capturing a meaningful share of the market, especially commercial business, but it would be a mistake to assume that every NFIP cancellation represents a successful move to private coverage,” Stanney said. “Premium increases under FEMA's Risk Rating 2.0 methodology have also contributed to policyholders dropping coverage.”
Moody’s cited earlier research showing that private flood policies roughly doubled since 2020, while NFIP policies declined by a similar absolute number. The available data did not establish whether the same households or geographic areas accounted for both movements.
For individual placements, Stanney described clients shopping for alternatives or reconsidering their limits, alongside others who remain unconvinced they need flood insurance at all. “Our role is to help them understand their actual exposure, evaluate their options, and make an informed decision before a loss occurs,” he said.
Stanney identified several recurring misconceptions among clients: that properties outside FEMA’s high-risk zones are safe, that escaping damage during Sandy indicates protection from future flooding, and that homeowners’ insurance or government assistance will cover flood damage.
Clients also associate flood insurance exclusively with waterfront properties or assume lender requirements accurately reflect their exposure, he said. Another misunderstanding is that a “100-year flood” can happen only once per century.
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Moody’s analysis, published October 28, challenges the use of Sandy’s footprint as a guide to future losses. Coastal surge drove Sandy’s destruction, while Hurricane Ida’s remnants in 2021 demonstrated how intense rainfall can overwhelm urban drainage away from shorelines.
Physical defenses also have limits. A coastal barrier may reduce surge exposure without addressing rainfall-driven flooding, while protected properties can remain dependent on vulnerable utilities and access routes.
“A flood barrier can protect a shoreline but can’t protect a city against every way water can arrive,” wrote Firas Saleh, director of product management at Moody’s.
The firm argued that assessments should consider multiple flood mechanisms and plausible events, including losses beyond FEMA-mapped zones. Its modeled scenarios examine potential exposure under specified assumptions rather than forecasting the next flood.
The adequacy of protection also extends beyond policy counts. Moody’s said the level and limits of insurance, and where coverage is concentrated, need to be considered against the distribution of exposure. Growth in one market does not establish that another community’s gap has closed.
Uninsured losses can leave households financing repairs and displacement, businesses absorbing damage and interruption, and governments drawing on reserves or funding reconstruction.
“Where coverage is absent or insufficient, the financial loss does not disappear. It is redistributed,” Saleh wrote.
