"The driving force behind the creation of the NFIP–no viable private market–remains the fundamental issue," NAMIC said.

The comment letter was sent to FEMA as part of a new FEMA initiative to provide Congress with a "comprehensive analysis" that addresses issues both of immediate concern "as well as establishing a solid foundation for the NFIP's future."

FEMA held public meetings on the issue earlier this month in Washington and in Denver.

The letter was one of 17 sent to the agency regarding its request for comments. The comment period closed Friday. Most of the letters were from emergency management agencies associated with states particularly affected by flooding, including Michigan and Mississippi.

NAMIC's comments rejecting privatization are in response to proposals made at the Washington meeting that in evaluating FEMA's future, the Obama administration should consider privatizing all or part of the program.

That suggestion was made at the hearing by the Reinsurance Association of America and the Association of Bermuda Insurers and Reinsurers.

NAMIC said the problem with privatization is that in order to underwrite a risk like flood, an insurer would need to charge very high premiums and maintain significant capital reserves in case of massive flooding, when all of their policyholders would be making claims.

"In actuality, the only people who would be able to afford coverage would likely be those that did not need it," NAMIC said in its comment letter.

The letter added:

"The question has been asked as to whether the private insurance market is ready to handle flood risk now, but nothing about the situation has fundamentally changed and primary insurers are still unable to offer this coverage. Technically, the market is already 'privatized' in that there is nothing preventing companies from currently writing flood coverage and competing with the NFIP. Almost none have elected to do so."

The NAMIC letter also rejected another proposal–price controls.

"Price controls further diminish the opportunity for a private market for flood insurance to develop," NAMIC said.

"In order to achieve a fully privatized market, companies would need to be able to charge actuarially sound, risk-based rates," the NAMIC comment letter explained.

However, there are two main problems with this approach, NAMIC noted.

First, lawmakers and regulators often impose restrictions that allow high-risk property owners to pay artificially low insurance premiums, forcing lower-risk property owners to subsidize the insurance costs or creating hidden cross-subsidization.

"Secondly, even if rating freedom was achievable the premiums would likely be much more expensive, making affordability a major issue," the letter observed.