Flood risk has been notably increasing and intensifying across Kentucky, Tennessee, and West Virginia, driven by rainfall, mountainous terrain, and aging infrastructure, according to the Neptune Flood Research Group. However, “due to price increases under the National Flood Insurance Program’s (NFIP) Risk Rating 2.0, flood insurance participation is declining rapidly from a very low base, leaving the region financially exposed,” the report states.
Flood Risk
“The central Appalachian states of Kentucky, Tennessee, and West Virginia have emerged as some of the most vulnerable areas in the U.S. to severe flooding,” notes the report. “Driven by a combination of steep terrain, aging infrastructure, and increasingly erratic climate patterns, these states face a mounting threat from both riverine and flash flood events.” Over the past 20 years, natural disasters have caused destruction and devastation, along with millions of dollars in damages.
According to FEMA, in Kentucky, there are approximately 120,000 buildings in high-risk areas (Special Flood Hazard Areas, or SFHAs); 110,000 in Tennessee; and 135,000 in West Virginia. Furthermore, according to First Street Foundation’s 2020 flood model, “which incorporates rainfall intensity, terrain, and climate projections…234,000 properties in Kentucky, 383,000 in Tennessee, and 331,500 in West Virginia face ‘substantial risk,’ with those numbers expected to rise significantly by 2050.”
Insurance Coverage Rates
Despite repeated flood-related disasters and increasing exposure, flood insurance coverage in the three states remains critically low, according to the report. “FEMA’s NFIP holds approximately a 90% share of the primary flood insurance market, and their data indicates that across Kentucky, Tennessee, and West Virginia, only about 1% of residential structures are insured against flooding,” the report states. “These figures fall well below the already modest national average of just over 3%, leaving millions of households financially exposed.”
Flood insurance uptake is low for several reasons, the report explains, including outdated or incomplete flood maps; high rates of mortgage-free ownership, meaning no legal requirement to have flood insurance, even in high-risk areas; affordability challenges; widespread misconceptions, with many residents believing their homeowners insurance covers flooding when it does not; and limited awareness and outreach.
There are also geographic disparities in coverage, explains the report. “Even in the highest-risk counties, penetration rates remain surprisingly low…[but] despite the variations between counties, the broader trend is unmistakable; flood insurance uptake across central Appalachia is not only low but is structurally misaligned with real flood exposure,” it states. “This imbalance has left entire communities vulnerable to repeated financial devastation and underscores the urgent need for improved outreach, updated risk assessment tools, and more accessible coverage options.”
Insured Losses
Despite low flood insurance participation, the NFIP has paid out over $600 million in claims over the past 20 years across the three states. Uninsured losses amount to billions more, “with the cost of recovery often falling to individual families, strained local governments, and federal disaster programs,” according to the report. Before 2017, nearly all flood coverage in these states came through the NFIP. Although the private flood insurance market has seen growth over the past few years, it still only accounts for a minimal share of total coverage, and the NFIP remains the dominant source in central Appalachia.
Kentucky
The state of Kentucky has faced several recent instances of catastrophic inland flooding, with the most recent being the February 2025 floods, which “brought nearly nine inches of rain over four days, causing flash flooding that killed 14 people and triggered 855 NFIP claims, with damages likely in the hundreds of millions,” according to the report. The prior July 2022 floods killed 37 people and damaged or destroyed over 9,000 homes, causing thousands of uninsured losses.
“NFIP data shows that even with low insurance uptake, the program has paid out over $100 million in Kentucky over the past 20 years. Jefferson County leads the state in claims volume, with more than 2,300 NFIP claims totaling $48.5 million.”
Tennessee
“Tennessee’s most damaging flood event occurred in May 2010, when torrential rainfall pushed the Cumberland River past 51 feet, submerging downtown Nashville and causing $2 billion in overall losses, including damage to major public infrastructure and cultural institutions. The event killed 21 people and resulted in the state’s largest-ever flood insurance payout,” according to the report. NFIP claims in Tennessee over the past twenty years have totaled over $250 million, with Davidson County alone accounting for 3,549 claims and $175 million in paid losses.
West Virginia
“West Virginia’s steep topography and narrow valleys make it exceptionally vulnerable to flash flooding,” states the report. “In June 2016, a severe rainfall event triggered catastrophic flooding that killed 23 people and caused more than $1.1 billion in damages. Many of the hardest-hit areas had little warning and limited insurance coverage.”
NFIP payouts in Virginia over the past two decades have exceeded $130 million. Kanawha County leads with 913 claims and nearly $27.5 million in total losses, with other frequently affected counties including Greenbriar, Logan, and Ohio.
Trends and the Future
Rising insured losses and long-term fiscal challenges have forced the NFIP to reevaluate its pricing model, according to the report. In 2021, FEMA launched Risk Rating 2.0, “a reform designed to transition from legacy flood zone-based pricing to a property-level approach. While the reform aims to promote pricing equity and better reflect true flood exposure, its effects have been profound—particularly across central Appalachia. As Risk Rating 2.0 phases in its new pricing approach, average NFIP premiums in West Virginia are projected to rise from $1,133 to $3,074. In rural Kentucky, some households will see increases exceeding 300%.” Millions of properties face significant flood exposure, but fewer than 1% of households are insured.
There are two major consequences to the premium adjustments, the report explains. First, “they reverse years of underpricing in inland and historically subsidized regions. Second, they impose major affordability burdens on low- to moderate-income households.” Many Appalachian counties now see NFIP premiums consuming over 6%, and in some cases 7–9%, of their household disposable income—figures which far exceed common thresholds for housing-related insurance affordability.
Despite these burdens, Risk Rating 2.0 may offer long-term benefits. “Clearer, more accurate risk signals will drive proactive mitigation investments, including elevating homes, retrofitting basements, and relocating utilities above base flood elevation. At the same time, rising NFIP costs have allowed for greater participation of private flood insurers in historically underserved markets.”
All in all, the risk is growing; insurance participation is collapsing; the current system is unsustainable; and there is an urgent opportunity for private market solutions. “To protect the central Appalachian region from future disaster losses, stakeholders must act now,” warns the report. “Expanding access to flood insurance—through modern modeling, improved communication, and competitive private options—is essential. This is not just a matter of resilience, but of equity and fiscal responsibility and a stronger, broader, and more affordable flood insurance ecosystem is both necessary and achievable.”