National Flood Insurance Program growing.

The National Flood Insurance Program has made significant progress in four decades of existence, but it continues to face challenges associated with quantifying and managing risk, said David Maurstad, assistant administrator of mitigation at the Federal Emergency Management Agency.

Speaking at the RIMS conference, Maurstad said while the private market can manage catastrophe exposure in ways such as including reinsurance and proper geographic distribution of risk, the flood program's design and many of its public policy goals allow only limited application of these techniques.

As a result, even in non-catastrophe years, flood insurance claims vary widely from year to year, with annual claims payments averaging in excess of $1 billion, Maurstad said. So far, the NFIP has paid out $14.5 billion to policyholders who were impacted by Hurricane Katrina. "When you add in hurricanes Rita and Wilma and all the claims handling expenses, the final total is estimated to grow to about $20 billion," he said.

The NFIP remains the nation's largest single-peril insurance program with more than $1 trillion in insured assets and more than 5.4 million policyholders.