(Reuters) - Hurricane Irma could test a nascent private flood insurance market in Florida that some advocates say is a model for making U.S. flood coverage more affordable and commonplace in high-risk areas.

A Home Depot store employee helps to load bags of sand for customers in the Little Havana neighborhood in Miami, Florida, September 5, 2017. Residents are preparing for the approach of Hurricane Irma. REUTERS/Joe Skipper

Florida’s private flood insurance market represents a tiny sliver of all flood policies in the state, but if a hurricane does hit Florida later this week, policyholders, industry and the federal government will see how private insurance performs in one of the country’s largest flood-prone markets.

“It’s a new breed of insurance in Florida,” said Loretta Worters, a spokeswoman for the Insurance Information Institute, an industry-funded communications group. “You have these companies that have never been tested for flood. We’ll have to see how it works.”

Even before Hurricane Harvey triggered massive flooding in Texas last week, U.S. lawmakers were looking at alternatives to the indebted government-backed model of flood insurance.

The National Flood Insurance Program (NFIP), which owes $24.6 billion to the U.S. Treasury, is set to expire on September 30. It is the only source of flood insurance for most Americans because the risk of flooding is so high it makes it too costly for typical insurers to sell.

A Florida law in 2014 simplified the process for setting premium prices, enabling private insurers to sell different types of flood policies in the state, opening up the market.

Some advocates for reforming the program are pushing for additional changes to U.S. regulations that they say will spur more Americans to buy private coverage including making private flood policies suitable as a condition for home loans.

Some flood reform advocates, however, argue against letting private flood insurers into the market, because they say they will cherrypick the most profitable risks and leave the NFIP to deal with the rest.

Florida has more than 1.7 million NFIP policies in force, representing about 35 percent of all NFIP policies, according to the Florida Office of Insurance Regulation and Federal Emergency Management Agency data.

But more than one million homes at risk for storm surge damage in six of Florida’s riskiest metropolitan areas are not covered by flood insurance, according to an analysis of data from analytics firm Corelogic by the FAIR Foundation, a Fort Lauderdale, Florida-based non-profit group involved with flood policy issues.

That is because the homes are located in areas that the Federal Emergency Management Agency (FEMA) has not designated as having the highest flood risk, a designation that triggers the mortgage requirement to buy insurance, said Jay Neal, FAIR Foundation president and chief executive officer.

“The only way to address that insured risk is to have the private market participate,” said Neal, who also heads the Florida Association for Insurance Reform, a coalition of insurers and other business groups.

Insurers see opportunity in that untapped market. Nearly 30 insurers are offering various types of private flood insurance coverage in Florida, including units of American International Group Inc, Chubb Ltd. Progressive Corp and HCI Group Inc, according to the regulator’s website.

Insurers are buying reinsurance from companies such as Renaissance Re, Validus Re and XL Catlin to hedge the risk.

More than 20,000 private market flood policies were in force in Florida as of June 30, said Florida’s insurance regulator.

Hurricane Harvey’s punishing blows to Houston has spawned interest in private flood insurance among Floridians, even before the chances of Hurricane Irma hitting Florida increased, said Josh Butts, and insurance agent who owns Cornerstone Insurance Inc in Tampa.

“We’ve sold more flood insurance during the last week because of what happened in Texas than we have during a storm in Florida,” Butts said.