National Flood Insurance Program:
Background, Challenges, and Financial Status

Rawle O. King
Specialist in Financial Economics and Risk Assessment
July 1, 2011
Congressional Research Service
7-5700
www.crs.gov
R40650
CRS Report for Congress
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repared for Members and Committees of Congress

National Flood Insurance Program: Background, Challenges, and Financial Status

Summary
In 1968, the U.S. Congress established the National Flood Insurance Program (NFIP) to address
the nation’s flood exposure and challenges inherent in financing and managing flood risks in the
private sector. A three-prong floodplain management and insurance program was created to (1)
identify areas across the nation most at risk of flooding; (2) minimize the economic impact of
flooding events through floodplain management ordinances; and (3) provide flood insurance to
individuals and businesses. The NFIP today covers approximately 5.6 million households and
businesses across the country for a total of $1.25 trillion in exposure. Major changes were made
to the program in 1973, 1994, and 2004.
Legislation to strengthen and reauthorize the NFIP failed to pass the 111th Congress, leaving the
program with a temporary extension scheduled to expire on September 30, 2011. Concerns
remain that this latest extension, and the possibility of yet another lapse in authority after
September 30, 2011, could result in uncertainty among lenders, borrowers, and policyholders,
potentially adversely impacting the housing market.
Until 1986, the NFIP was funded, in part, by congressional appropriations. The NFIP was self-
supporting from 1986 until 2005 as policy premiums and fees covered all expenses and claim
payments. In 2005, the NFIP incurred approximately $17 billion in flood claims caused by
Hurricanes Katrina, Rita, and Wilma. As of January 31, 2011, the outstanding debt and accrued
interest cost stood at $17.775 billion. Under current law, the funds borrowed from the U.S.
Treasury must be repaid with interest. The program, however, is not in a position to repay the
debt.
The 112th Congress is weighing the costs and benefits of enhancing risk management activities
associated with a nationwide Flood Insurance Study (FIS) and the re-accreditation of levees based
on the Federal Emergency Management Agency’s (FEMA’s) regulatory criteria. This requires
revisiting U.S. flood-control policy in the context of (1) reforming and reauthorizing the NFIP;
(2) seeking resolution of many of the underlying economic and engineering challenges relative to
the condition of flood-control protection infrastructures; and (3) strengthening the coordination
between FEMA, U.S. Army Corps of Engineers, and the U.S. Department of Agriculture with
local homeowners, businesses, and the American taxpayers.
Several bills are before the 112th Congress to reform and reauthorize the NFIP. The Flood
Insurance Reform Act of 2011, H.R. 1309, was reported by the House Financial Services
Committee on May 13, 2011, and is awaiting a vote in the full House of Representatives. H.R.
1309 would reauthorize the NFIP for five years to September 30, 2016; suspend the mandatory
flood insurance purchase requirement for up to three years; reduce rate subsidies and move to
make the NFIP ultimately actuarially sound; and require FEMA and the U.S. Government
Accountability Office (GAO) to study the feasibility of privatizing the NFIP. H.R. 435, the
National Flood Insurance Program Termination Act of 2010, would terminate the NFIP and
authorize insurance interstate compacts to allow states to provide flood insurance. S. 1091, the
Consumer Option for an Alternative System to Allocate Losses (COASTAL) Act of 2011, would
reauthorize the NFIP for five years and create a system for using data from federal agencies, such
as the National Oceanic and Atmospheric Administration (NOAA), to help allocate total losses
between wind and water when the structure is a total loss.
This report will be updated as events warrant.
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National Flood Insurance Program: Background, Challenges, and Financial Status

Contents
Recent Developments.................................................................................................................. 1
Background ................................................................................................................................ 4
Exposure to Flood Hazard Risk ................................................................................................... 6
Economic Regulation and Recovery from Flood Hazards ............................................................ 7
Evolution of the National Flood Insurance Program .................................................................... 8
Lessons from Katrina and the 2008 Midwest Floods.............................................................. 9
Identification and Mapping of Flood Hazard Areas: Accuracy of Maps................................ 12
Financial Status......................................................................................................................... 13
NFIP Treasury Borrowing ................................................................................................... 14
Factors Affecting Financial Solvency .................................................................................. 16
Flood Insurance Premium Discounts ............................................................................. 16
Repetitive Flood Loss Properties ................................................................................... 17
Mandatory Flood Insurance Purchase Requirement ....................................................... 19
Flood Hazard Mapping ................................................................................................. 19
Floodplain Management Regulations ............................................................................ 21
Federal Multi-Peril Insurance Program.......................................................................... 21
Reauthorization of the NFIP................................................................................................ 22
Options for Managing and Financing Flood Risk....................................................................... 23

Figures
Figure 1. Total Premiums Written versus Total Payments Made to Policyholders Under
the National Flood Insurance Program: 1978-2010 ................................................................... 6

Tables
Table 1. Top Fifteen Significant Flood Events Covered by the National Flood Insurance
Program ................................................................................................................................... 5
Table 2. NFIP Program Statistics ............................................................................................... 13
Table 3.History of U.S. Treasury Borrowing Under the National Flood Insurance
Program ................................................................................................................................. 15
Table 4.Total Repetitive Flood Loss Properties in the NFIP: 1978 - 2011................................... 18
Table A-1.Repetitive Flood Loss Properties in the National Flood Insurance Program .............. 26

Appendixes
Appendix A. National Flood Insurance Program: Repetitive Flood Loss Properties.................... 26
Appendix B. Chronology of Public Laws that Reauthorized the National Flood Insurance
Program ................................................................................................................................. 28
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National Flood Insurance Program: Background, Challenges, and Financial Status


Contacts
Author Contact Information ...................................................................................................... 29

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National Flood Insurance Program: Background, Challenges, and Financial Status

he United States is a geographically diverse nation that is exposed to hydro-meteorological
(weather, climate, and water-related) hazards that each year cause widespread physical and
T economic damages and threaten human life and fragile ecosystems. In 1968, Congress
created the National Flood Insurance Program (NFIP) to address the increasing costs of taxpayer-
funded disaster relief for flood victims and the increasing amount of damage caused by floods.1
Since its inception, the NFIP has earned sufficient premium in almost every year to pay flood
losses incurred by policyholders, and borrowed from the U.S. Treasury in catastrophic loss years
to meet revenue shortfalls. Because of extraordinary losses incurred following the hurricanes in
2005, however, the program carries a debt of $17.775 billion as of January 31, 2011. As it
currently stands, there is a widespread consensus that the NFIP faces financial, structural, and
managerial challenges and may require significant reforms to continue providing flood protection
to homeowners and businesses.
This report provides an analysis of the NFIP and its financial status; summarizes major challenges
facing the program, including issues affecting its long-term financial solvency; presents some
alternative approaches for managing and financing the flood losses; and describes pending
legislation on this issue.
Recent Developments
Flooding is an annual occurrence as snow melts and spring rains fill North America’s major rivers
and tributaries. During the past year, states along the lower Mississippi River and the upper
Midwest adjacent to the Missouri River have suffered massive flooding not seen since the 1930s.
Additional devastating floods and storm surges are anticipated in the years to come, which raises
a larger public policy challenge for Congress because the U.S. government requires that homes
located in high flood-hazard areas purchase insurance as a condition for a federally backed
mortgage. Unfortunately, after major floods, it is often discovered that many people who live in
high-risk areas and who have suffered a flood had not purchased flood insurance or had let their
insurance policies lapse. This has contributed to rising cost of taxpayer-funded disaster relief for
flood victims.
More recently, citizens, local officials, and policymakers have expressed concerns about the
adequacy of the levee systems along the Mississippi River and Federal Emergency Management
Agency’s (FEMA’s) recent decision to de-accredit many levees because they no longer provide
adequate protection against the 100-year flood. Residents and businesses in areas remapped into
Special Flood Hazard Areas (SFHA) must rethink their flood insurance as many with federally
insured mortgages will be required to buy coverage from the NFIP.
The NFIP is at a crossroads. After more than 40 years, experts are still debating whether the
program of federal flood insurance linked to locally enforced floodplain management regulations
and flood hazard maps is financially feasible. Some experts are calling for the privatization of the
program. After a nationwide effort to remap the floodplains to more fully incorporate residual
flood risk behind levees, there has been some resistance from property owners and local officials
requesting delays in the issuance of flood maps, making it easier to ignore flood risk.

1 FEMA administers the NFIP established by 42 USC § 4001 et seq.
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Legislation to reform and reauthorize the NFIP failed to pass the 111th Congress, leaving the
program with a temporary extension that will expire on September 30, 2011. Although FEMA is
now able to issue new policies, renew policies, increase coverage amounts, and pay claims,
concerns remain that this latest extension, and the possibility of yet another lapse in authority
after September 30, 2011, could result in uncertainty among lenders, borrowers, and
policyholders.
The current authorization status of the NFIP should be viewed within the larger context of efforts
in Congress to reform and modernize the NFIP. Since the devastation caused by Hurricanes
Katrina, Rita, and Wilma in 2005 and Ike in 2008, Congress has sought to reform and strengthen
the long-term viability of the NFIP with reforms that included efforts to increase participation in
the program, remapping the floodplains to encourage communities and citizens to understand
their risks from flooding and mitigate against future flood damage, and setting premiums for
repetitively damaged structures according to their “full risk” premium.
A lapse in NFIP authority after September 30, 2011, might be of concern to policymakers for
several reasons. First, access to a stable supply of flood insurance affects the recovery of the U.S.
housing market, rebuilding the Gulf Coast region after the 2005 hurricane season, to ensure the
overall safety and soundness of the banking industry’s loan portfolios. Second, access to flood
insurance remains critical to the government’s mandatory flood insurance purchase requirement
given that homebuyers need to purchase flood insurance as a condition for obtaining mortgage
financing from federally regulated lenders on loans that are or will be secured by property located
in SFHA. Third, federal flood insurance ensures that appropriate claims are paid for the more
than 5.6 million existing NFIP policyholders who depend on the NFIP as their main source of
financial protection against flooding.
On July 29, 2010, President Barack Obama signed into law H.R. 4899, the Supplemental
Appropriations Act of 2010,2 which requires FEMA and the U.S. Army Corps of Engineers
(USACE) to respond to disagreements expressed by communities about flood-control
infrastructure protection and flood risk mapping. FEMA was directed to create an interagency
task force that included USACE and the Office of Management and Budget (OMB) to track,
address, and where possible, resolve concerns stemming from FEMA mapping efforts in
communities. The task force has produced quarterly reports to the Committee on Appropriations
and other congressional committees of jurisdiction.
The 111th Congress ended without a reform bill being enacted into law. The key regulatory reform
issues debated in the 111th Congress that have carried over into the 112th Congress include
• long-term financial solvency of the National Flood Insurance Fund, which may
include requiring the NFIP to create a reserve fund; forgiveness of the U.S.
Treasury debt incurred during Hurricanes Katrina, Rita, and Wilma in 2005; and
phase-in of actuarial rates for non-residential, non-primary residences, and
repetitive loss properties;
• a program to review, update, and maintain flood insurance program maps and
elevation standards that include mapping of the 500-year floodplains and areas
behind levees;

2 P.L. 111-212; 124 Stat. 2303.
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• the requirement of FEMA to participate in state-sponsored mediation programs;
and
• an additional provision for multiple-peril (windstorm) insurance in the standard
NFIP policy.
In the 112th Congress, one unintended consequence of efforts to reform the NFIP involves
FEMA’s ongoing update of its flood hazard risk assessment processes—FEMA’s Map
Modernization (Map Mod) program—and its public awareness and education initiatives. As
newly revised Flood Insurance Rate Maps (FIRMs) become effective in NFIP-participating
communities across the country, many property owners not previously required to be covered
under a flood insurance policy are learning about new flood risk data currently being produced
and disseminated by FEMA. FEMA is informing homeowners that their properties have been
remapped into a SFHA and, therefore, they are subject to the NFIP’s mandatory flood insurance
purchase requirement.
On April 1, 2011, Representative Judy Biggert introduced H.R. 1309, Flood Insurance Reform
Act of 2011, that would phase in actuarial rates and reduce repetitive property loss claims. In
response to concerns expressed by homeowners brought into the NFIP through remapping, the
legislation would allow FEMA to suspend the mandatory flood insurance purchase requirement
for up to three years if such relief is sought by a particular community. The bill would also
mandate that both FEMA and the U.S. Government Accountability Office (GAO) assess the
option for privatization of the program.
On April 4, 2011, Representative Maxine Waters introduced H.R. 1026, Flood Insurance Reform
Priorities Act of 2011, which is similar to H.R. 5114 approved by the House in the 111th Congress.
On May 26, 2011, Senator Wicker introduced S. 1091, the Consumer Option for an Alternative
system to Allocate Losses Act of 2011 (COASTAL), which would reauthorize the NFIP for five
years and create a system for allocating losses between wind and water damage.
Another measure, H.R. 435, the National Flood Insurance Program Termination Act of 2010,
introduced by Representative Candice Miller, would terminate the NFIP and related mandatory
purchase and compliance requirements. The bill would authorize interstate compacts to allow
states to enter into agreements or compacts to make available to interested persons flood
insurance coverage.
Several other bills have been introduced to specifically address FEMA’s flood hazard mapping
program.
H.R. 700 (Walberg) would provide a moratorium on the issuance of flood
insurance rate maps, to assist property owners in adapting to flood insurance rate
map changes.
H.R. 764 (Alexander), Fair Treatment of Existing Levees Act of 2011, would
prohibit the Administrator of FEMA from using the assumption that a currently
existing levee or flood control structure does not exist to designate an area as
having new flood hazard pursuant to a flood map issuance, revision, or updating.
H.R. 898 (Costello) would suspend flood insurance rate map updates in
geographic areas in which certain levees are being repaired.
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H.R. 902 (Matsui) would require FEMA to consider reconstruction and
improvement of flood protection systems when establishing flood insurance
rates.
It is debatable whether reauthorization of NFIP will produce a flood-risk management program
capable of adequately protecting the public and reducing future flood damages at a time of
national economic uncertainty. Moreover, despite a comprehensive and unified system of public
works in the lower Mississippi River Valley and other flood-prone riverine areas, the United
States continues to face several challenges: flood-control infrastructure protection systems; rising
disaster expenditures; the accuracy and credibility of flood maps; residents’ understanding of the
risk and economic consequences of flooding; and the management of the resulting flood-related
risk for citizens, the federal government, and economic sectors, including agriculture.
Background
Historically, floods have been among the most costly natural disasters in the United States.
Flooding along river banks has been a main public policy concern for years. An additional
challenge today is flooding caused by weather-related coastal hazards—hurricanes, storm surges,
and tornadoes—that are increasing in frequency and severity, creating an unprecedented threat to
U.S. coastlines and Midwestern states where floods that would historically occur once every 20
years are projected to happen every four to six years.3 This situation has become a concern of
policymakers because more than half of the U.S. population now lives in coastal watershed
counties or floodplain areas and approximately 50% of the nation’s gross domestic product ($4.5
trillion in 2000) is generated in those Gulf and Atlantic coastal areas.4 One estimate from Lloyds
of London and Risk Management Solutions (RMS) predicts that flood losses along the Gulf and
Atlantic coastlines would increase 80% by 2030 with a one foot rise in the sea level.5 The
corresponding surge in economic losses from coastal hazards arguably demands a national policy
response to better manage the costs of existing coastal risks.
Table 1 provides a list of the top 15 flood events in the United States in terms of NFIP payouts.
The devastation from Hurricane Katrina emerged as a pivotal event in the history of federal flood
control policy, with wind and flooding estimated to have caused over $200 billion in economic
damages (both insured and uninsured) and more than 800 deaths.6 The 2005 hurricanes
strengthened arguments that there may be a trend increase in the cost of floods and the frequency
of major flood disasters.

3 National Science and Technology Council, Climate Change Science Program and the Subcommittee on Global
Change Research, Weather and Climate Extremes in a Changing Climate - Regions of Focus: North America, Hawaii,
Caribbean, and U.S. Pacific Islands
, June 2008, at http://www.climatescience.gov/Library/sap/sap3-3/final-report/
sap3-3-final-all.pdf.
4 U.S. Commission on Ocean Policy, An Ocean Blueprint for the 21St Century, September 2004, at
http://oceancommission.gov/documents/full_color_rpt/000_ocean_full_report.pdf.
5 Lloyds of London and Risk Management Solutions, Coastal Communities and Climate Change: Maintaining
Insurability
, 2008, at http://www.lloyds.com/NR/rdonlyres/38782611-5ED3-4FDC-85A4-5DEAA88A2DA0/0/
FINAL360climatechangereport.pdf.
6 24/7QuoteUS.com, 67 Worst Natural Disaster: The Last 103 Years, April 27, 2009, located at
http://www.247quoteus.com/general/67-worst-natural-disasters.
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Table 1. Top 15 Significant Flood Events Covered by the National Flood Insurance
Program
(1978 – February 28, 2011; $ nominal)
Number of
Average
Rank Event
Date
Paid Losses
Amount Paid
Paid Loss
1
Hurricane
Katrina
Aug.
2005 167,216 $16,172,136,626 $96,714
2 Hurricane
Ike
Sept.
2008 46,219
2,629,409,589
56,890
3 Hurricane
Ivan
Sept.
2004 27,637
1,582,348,735
57,255
4
Tropical Storm Allison
June 2001
30,6632
1,103,877,235 36,000
5
Louisiana
Flood
May
1995
31,343 585,071,593 18,667
6
Hurricane
Isabel Sept.
2003
19,860 492,830,017 24,815
7 Hurricane
Rita
Sept.
2005
9,504
470,413,959
49,496
8
Hurricane
Floyd Sept.
1999
20,438 462,268,248 22,618
9
Hurricane
Opal
Oct.
1995
10,343 405,527,543 39,208
10
Hurricane
Hugo Sept.
1989
12,840 376,433,739 29,317
11 Hurricane
Wilma
Oct.
2005
9,609
363,798,528
37,860
12
Nor’Easter
Dec.
1992
25,142 346,150,356 13,768
13
Midwest
Flood
June
1993
10,472 272,819,515 26,052
14
PA, NJ, NY Floods
June 2006
6,410
227,475,398
35,488
15 Nor’Easter
Apr.
2007
8,639
225,623,333
26,117
Source: U.S. Department of Homeland Security, Federal Emergency Management Agency.
The U.S. governments has at times regulated private economic activity for the purpose of
promoting economic recovery and protecting or supporting particular economic groups. For
example, economic uncertainty stemming from widespread flooding in the mid-1960s, the need
for economic relief and recovery for flood victims, and calls for a reduction in the financial
burden on taxpayers led to economic regulation of the nation’s floodplains and insurance markets.
The government became a regulator of certain economic activity in flood-prone areas to reduce
the physical and economic risks associated with flood hazards. In the absence of a sufficient
supply of insurance to meet societal demand, the government took action to safeguard the
economic interests of consumers, businesses, communities, and taxpayers.
Economic regulation was accomplished in two ways. First, the government acted to limit the
discretion of individuals and companies engaged in economic activity in flood prone areas.
Depending on whether a building is located in a government-designated SFHA, flood insurance
may be required as a condition of obtaining a federally secured mortgage loan. Homeowners
typically discover they need flood insurance during the home-buying process that includes a
disclosure of where the property is located relative to the SFHA that is mapped on a FIRM.
Second, economic regulation was accomplished through “managerial regulation,” with the
government providing subsidized flood insurance for individuals and businesses in communities
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that undertook specific steps to regulate the floodplain through land use zoning ordinances and
building standards.7
In the wake of Hurricanes Katrina, Rita, and Wilma in 2005, Hurricane Ike and the Midwest
floods of 2008, and the New England region floods in 2010, Members of Congress may wish to
examine the viability of the NFIP’s structure, function, and financial solvency. Some also
question whether the government should continue to underwrite insurance in support of coastal
development and rebuilding in flood-prone areas. Meanwhile, federal expenditures for federal
relief payments and insurance claims in coastal communities and along riverbanks continue to be
a major challenge for the NFIP.
Exposure to Flood Hazard Risk
Floods are historically among the most destructive hazards facing the nation. Figure 1 shows
flood loss payments and premium under the NFIP over the period from 1978 to 2010. The
economic impact of floods has shown a modest upward trend over the past several decades, both
in terms of unprecedented claims payments to insured victims and post-disaster federal relief to
aid the uninsured population exposed to flood hazard risk.
Figure 1. Total Premiums Written versus Total Payments Made to Policyholders
Under the National Flood Insurance Program: 1978-2010
($ nominal)
$4,000,000,000
$20,000,000,000
$18,000,000,000
$3,500,000,000
$16,000,000,000
rs
de

$3,000,000,000
$14,000,000,000
hol
y

m
iu

lic
$2,500,000,000
o
m
$12,000,000,000
P
re
o
P
t
n $2,000,000,000
$10,000,000,000
de
a

ritte
M
ts

l W
$8,000,000,000
n
a $1,500,000,000
e
m

Tot
y
$6,000,000,000
a
$1,000,000,000
l P
a

$4,000,000,000
Tot
$500,000,000
$2,000,000,000
$0
$0
8
0
2
4
6
8
0
2
4
6
8
0
2
4
6
8
0
197
198
198
198
198
198
199
199
199
199
199
200
200
200
200
200
201
Total Written Premium
Total Payments Made to Policyholders

Source: U.S. Department of Homeland Security, Federal Emergency Management Agency.

7 James Anderson, “Economic Regulation,” Encyclopedia of Policy Studies, Stuart S. Nagel, ed. (New York; Dekker
Publishers), 1994, p. 404.
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Economic Regulation and Recovery from
Flood Hazards

Congress has a responsibility through the “general welfare” and “interstate commerce” clauses of
the U.S. Constitution to promote national economic growth. One factor affecting the nation’s
economic well-being is the proper functioning of markets for natural disaster risk: do economic
markets provide a sufficient amount of insurance against flood hazards? Further, to the extent that
flood insurance exists, are the insuring firms sufficiently capitalized so that widespread
insolvencies would not occur? These were just a few of the key questions the nation faced in the
1960s, as hurricanes caused increased havoc along the U.S. Gulf and Atlantic coasts.
There were four very broad underlying causes for economic regulation—government
intervention—in the market for flood insurance in the 1960s. First, people insisted that social and
ethical values as well as economic values should be reflected in the operation of the economy.
Persons suffering economic distress or dislocation from flood hazards sought and received
governmental aid in dealing with their problem. The aid was in the form of disaster relief
assistance, subsidized flood insurance, and government spending on flood risk identification and
mapping.
Second, government action was viewed as being necessary to bring about more efficient
coordination and utilization of resources. Economic regulatory programs were thought to be
needed to prescribe certain land use zoning ordinances and building code standards to govern
economic or business behavior to reduce the physical and economic risks associated with coastal
hazards.
Third, as the nation experienced widespread flooding in the 1960s, people became interested in
their personal security and, thus, in shifting some or all of the risk of economic life from
themselves to government. In response, policymakers changed the way economic risk of flooding
was defined and the means of achieving security for the individual. Economic hazards, whether
man-made or natural, were initially considered inevitable or “acts of God” but came to be viewed
as public problems that required government action to protect individuals, businesses,
communities, and taxpayers. Government assistance in the form of subsidized insurance
premiums was viewed as a solution to reduce the future costs and risks of investing in flood-
prone areas.
Fourth, sole reliance on insurance markets for flood risks was not an option. This situation
provided a rationale for possible government intervention in the economy to ensure that the costs
and benefits of living in flood-prone areas were not ignored. Individuals and insurers at risk of
flooding, however, have in the past lacked the information necessary for the market system to
operate effectively. Insurers did not always have flood hazard maps, as they do now, and thus had
no reliable, consistent, and cost-effective way to identify and assess flood risk. Homeowners did
not and sometimes still do not, have the information needed to make rational economic decisions
about real estate investments. All this resulted in a misallocation of resources which required and
still requires government intervention to protect the public interest.
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Evolution of the National Flood Insurance Program
Flood hazards in the United States, whether from hurricanes and the impact of storm surge on
property or inland flooding on rivers, lakes, and streams, was largely deemed commercially
uninsurable. The standard multi-peril homeowners insurance did not provide coverage against
flood hazards. Floods were perceived to be uninsurable for three reasons: (1) adverse selection
meant that only individuals in flood-prone areas would purchase coverage; (2) risk-based
premiums were too costly for the average household; and (3) insurers could not generate
sufficient premiums to insure against a catastrophic flood event. Government mapping of areas
prone to flooding, subsidized flood insurance, and floodplain management regulations were key
to the program’s structure and function. These concerns about flood insurance market failure led
to the passage of the National Flood Insurance Act of 1968.
Traditional insurance principles indicated that private insurers would not be able to gather a large
enough pool of independent risks to allow the actuarial technique of “law of large numbers” to
reduce the risk. Most property owners in floodplains usually face the same flood hazard and their
risks tend to be highly correlated—not independent. Correlated risks means the insurer must
charge higher premiums to reflect a larger risk load or administrative cost that accounts for the
uncertainty faced by the insurer in predicting future losses of the pool. In other words, the
premium level that private insurers needed to adequately underwrite flood hazards would be so
high that few would be willing to purchase coverage.
The NFIP was a public policy response to the flood peril and escalating costs of taxpayer-funded
disaster relief for flood victims. Federally backed flood insurance was made available to home
and business owners in communities that voluntarily agreed to adopt and enforce floodplain
management ordinances designed to reduce flood-related property losses. The creation of the
NFIP marked a significant shift in U.S. flood control policy away from a “levee-only” flood
reduction approach towards a risk identification, risk financing and floodplain management
approach that was intended to foster individual responsibility and build local self-sufficiency in
terms of land-use zoning ordinances and construction standards.
Federal flood insurance was considered to be an economically efficient way to indemnify flood
victims and to have individuals internalize some of the risk of locating property in the
floodplains.8 The federal government would utilize its capacity to spread losses over time with the
NFIP’s ability to borrow money from the U.S. Treasury to offset program deficits. A federal
government insurance program, it was thought, could also link the availability of flood insurance
to land use regulation and building codes that would, in theory, reduce long-term flood risk.
Today, under the NFIP, the federal government is required to take certain actions to
• identify and map areas across the country that are at high risk of flooding;
• indemnify individuals and businesses against flood losses by making flood
insurance widely available at actuarially sound rates or with legally mandated
premium subsidies; and

8 Dan R. Anderson, The National Flood Insurance Program: Problem and Potential, The Journal of Risk and Insurance,
1974, vol.16 (4), p. 579-599.
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• reduce future flood losses through floodplain management regulations and
actions.9
The NFIP has undergone major changes largely in response to significant flood events over the
years. For example, the program was created after Hurricane Betsy devastated the Gulf Coast in
1965. After Hurricane Agnes in 1972, recognizing the low market penetration of flood insurance,
Congress enacted the Flood Disaster Protection Act of 197310 to establish a mandatory flood
insurance purchase requirement for structures located in identified SFHA. After the 1973 act,
federally regulated lenders were obligated to require flood insurance on any loan secured by
improved real estate in a FEMA-designated SFHA in a participating community.
After the 1993 Midwest floods, it became apparent to Congress that homeowners were still not
adequately complying with the mandatory insurance purchase requirement. The Midwest flood of
1993 provided the impetus for strengthening lender compliance through the mandatory purchase
provisions in the 1994 National Flood Insurance Reform Act.11 Recognition of the impact of
properties prone to repetitive flooding on the financial condition of the program led to the passage
of the Flood Insurance Reform Act of 200412 which established a pilot program for the mitigation
of severe repetitive loss properties (SRLPs) and the funding of mitigation activities for individual
SRLPs.
Although the NFIP faces many challenges, and there is widespread agreement that the program
needs to be reformed, the evidence continues to suggest broad support for the basic principle of
using an insurance pooling mechanism for those who have chosen to live in high-risk areas. Some
of the policy questions for the 112th Congress include the following: Is the NFIP currently
encouraging unwise construction in floodplains? Are taxpayers subsidizing unwise construction
as a result of inaccurate maps? If the program does encourage unwise construction or rebuilding
in high-risk areas without proper first-floor elevation, what steps should policymakers take to
keep the promises of safer construction made to taxpayers at the inception of the program? If
premiums are inadequate to finance programs, is Treasury debt the only answer?
Lessons from Katrina and the 2008 Midwest Floods
The 2008 Atlantic hurricane season was among the costliest on record for flood losses and
resulted in a large infusion of taxpayers’ money to cover uninsured disaster losses. Hurricane Ike
alone caused about $2.3 billion in NFIP claims along the coastal areas of Texas and Louisiana and
further inland, including many areas not typically subject to tropical rain events. In addition to
flooding from Hurricane Ike there was extensive 500-year flood damage in the Midwest that was
not anticipated by current out-of-date methodologies. According to FEMA, more than 11 million
people in nine Midwestern states were affected by the 2008 Midwest floods as major rivers in
Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, and Wisconsin
overflowed their banks and levees. Especially hard hit states were Iowa, Indiana, and Illinois,
where the river levels surpassed levels reached in the Great Flood of 1993.

9 Flood damage reduction is thought to be achievable through extensive flood control structures, such as levees and
dams and non-structural methods, including land use ordinances, buy-outs, and elevation of existing buildings and
roads.
10 P.L. 93-234, 87 Stat 975.
11 P.L. 103-325, 108 Stat. 2255.
12 P.L. 108-264, 118 Stat. 712.
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Although the 2008 Midwest floods caused dozens of levees to be breached, destroying thousands
of homes and businesses, and inundating thousands of acres of agricultural cropland, the flooding
did not rank among the NFIP’s top 15 most costly events. Payments under the NFIP were
relatively low because of low flood insurance purchases in the affected areas. Similarly, although
the 1993 Midwest flood was the most devastating flooding in the region’s history, it ranks 13th
among the leading NFIP flood events with $273 million in NFIP claims.
In 2005, the devastating flooding caused by Hurricanes Katrina and Rita resulted in
approximately $200 billion in economic losses, of which $21.9 billion was covered under the
NFIP. The massive flood losses from Hurricanes Katrina and Rita financially overwhelmed the
NFIP. They also focused public attention on (1) the economics of government risk-bearing
through federal flood insurance when private insurers do not offer affordable coverage; (2) the
exposure of the federal taxpayer to losses when program revenues do not cover costs; and (3) the
effectiveness, arguably limited, of the nation’s floodplain management strategy in reducing
federal disaster relief expenditures.
Several lessons emerged from Hurricane Katrina and the 2008 Midwest floods that could help
inform Members of the 112th Congress during policy deliberations on the reform and
reauthorization of the NFIP.
Program Participation to Reduce Uninsured Losses. Many homeowners do
not completely recognize or internalize their flood risk and act overly optimistic
about the magnitude of the flood risk to which they are exposed. Consequently,
the NFIP has not achieved the level of individual participation originally
envisioned by Congress. A study of the NFIP’s mandatory purchase requirement
nationwide conducted by the Rand Corporation indicated that only about 49% of
single family homes in SFHA are covered by flood insurance.13 In the absence of
flood insurance, the cost of repairing flood damaged property is usually borne
either by the property owner from their own financial resources, or by federal
relief payments instead of by flood insurance payments. This situation has
resulted in billions of dollars of uninsured property losses and arguably results in
higher social costs. The high degree of uninsured flood losses during the 2008
Midwest floods has raised the policy question of who should appropriately bear
the cost of the decision to live in potentially high-risk areas, including areas
behind flood control structures.
Inadequate Floodplain Management. The altering of rivers and streams by
construction of dams, levees, and other flood control structures arguably
increased the risk of major floods and development throughout the affected
floodplains. Policymakers learned that there are hidden costs to water resources
and flood control structures and that steps must be taken to reduce the risk of
future flood disasters. There is the recognition of the need to strengthen the NFIP
community land-use and building standards to reduce floodplain development,
improve public awareness of flood risk, and reduce cost to U.S. taxpayers. The
U.S. Army Corps of Engineers has undertaken cost-benefit analysis of water
resources projects. The findings of these studies could be used to better manage
the NFIP’s floodplain management standards.

13 Rand Institute for Civil Justice, “The National Flood Insurance Program’s Market Penetration Rate: Estimates and
Policy Implications,” http://www.rand.org/pubs/technical_reports/2006/RAND_TR300.pdf.
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Flood Risk Assessment and Mapping. Nationwide actuarial rates and
underwriting process may not reflect the actual flood risk in a given location.
Property owners affected by Hurricane Katrina and the 2008 Midwest floods may
have made location choices that did not consider all of the costs because of
inaccurate or outdated flood hazard maps. The price charged for federal flood
insurance could understate the risk; premiums may be too low or higher than the
actual risk would dictate. Economists note that if property owners had to incur
more of the cost of locating in flood-prone areas with the purchase of insurance,
they would make more efficient location decisions. Moreover, the maps did not
delineate areas of storm water and groundwater flooding or capture increases in
localized storm water runoff flooding resulting from development, deforestation,
and other land use changes.
Residual Risk Behind Levees. Flood damage in 2008 was relatively high
because of the over-reliance on levees and the false sense of security they
provide. Homeowners may have thought that because they resided behind a
certified levee, they were not subject to flood risk. There are significant potential
economic risks of not pricing or establishing sufficient loss reserves to cover
residual risks behind flood control structures. Based on the certification of levees
as providing at least protection from the 1% annual chance flood, property
owners may not be required to purchase flood insurance, yet they may face
significant uninsured losses if the levee is overwhelmed. FEMA has consistently
sought to communicate to the public the fact that certified levees do not eliminate
the risk of flooding. The lack of understanding of the national flood risk, the
inadequate communication of that risk, and diminished capabilities in flood risk
management due to inaccurate or out-of-date flood hazard maps have been
deemed major weaknesses in the program.
Inadequate Pricing of Flood Risks. The most costly flood in the 41-year history
of the NFIP was caused not by rainfall-river flooding but by breeched or
overtopped levees that did not protect the City of New Orleans from coastal
storm surges. According to FEMA, some 75%-80% of the area behind the levees
protecting New Orleans was designated SFHA (high-risk zone) due to rainfall
and there was an explicit flood insurance purchase requirement in effect in the
affected areas. Still, the NFIP assumed the levees were going to hold back storm
surge floods and the program did not adequately price the policies to reflect the
possible failure or overtopping of levees.
Availability of Federal Disaster Assistance. Flood victims may have thought, in
retrospect correctly, that the purchase of flood insurance was not necessary to
receive some compensation for flood related losses from the federal government.
The availability of federally-subsidized flood insurance in high-risk areas
arguably encouraged too many people to locate in flood-prone areas and to not
take appropriate steps to mitigate loss, leaving these financial losses to be either
uncompensated or transferred to third-parties, including taxpayers via federal
disaster assistance. Economists maintain that the assurance of federal assistance
in the event of a repeated disaster creates a “moral hazard” by lowering the
incentives to avoid risk. In some ways, this situation arguably counteracts one of
the original objectives of the NFIP, namely to minimize future flood damages and
the corresponding need for federal disaster relief.
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Identification and Mapping of Flood Hazard Areas: Accuracy of
Maps

It is the responsibility of FEMA to identify flood hazards nationwide and make flood map
information available at a reasonable cost to all parties.14 FEMA works with communities to
develop new flood hazard data or revise existing data as part of a flood insurance study, issues
public notification about maps, and engages in education and outreach to help ensure that
community leaders and residents understand the mapping process and the appropriate use of
maps.
Reliable flood risk data and the methodology for updating flood maps and educating residents
about flood risk contribute to mitigating future flood losses and ensure the fiscal soundness of the
NFIP. However, FEMA has been criticized by community officials and property owners with
respect to flood-control infrastructure protection and its flood risk mapping process. Mapping
flood hazards require accurate data collection and the latest engineering and flood modeling
digital mapping technologies to make sure that the maps reflect the highest quality of information
available to local communities and to FEMA.
Flood maps typically become outdated and inaccurate when they fail to reflect development or
natural changes in the environment.15 For example, the construction of roads and buildings create
impermeable surfaces that reduce the natural environment’s ability to absorb or delay water flows
and changes in drainage patterns―a situation that could increase flood risk in the affected area. In
addition, flood maps might not adequately consider coastal flood hazards such as cumulative
shoreline erosion or the loss of wetland, which serves as a natural buffer to storm surge and
reduces downstream flooding in inland areas. Flood maps must regularly be updated to reflect
these changes.
FEMA performs engineering studies as part of Flood Insurance Studies (FIS) to identify a
community’s flood risk (i.e., probability of flooding in a particular geographic area) and the
delineation of special flood hazard areas.16 The flood hazard assessment and mapping begins with
modeling of rainfall and storm tide records for the local areas. The data is then simulated to
determine the likely discharge that could result from storms of various probabilities. This
discharge data is applied to a cross section of the floodplain to estimate flood depths at various
locations. Once FEMA determines the flood depths in various areas on the flood map, the next
step is to calculate the depth of flooding for buildings in an area and calculate the dollar damages
using a vulnerability function (state-damage curve) derived from past flood events.17 The flood
elevation of the first floor of the structure relative to the flood depth on the floodplain determines
property-specific flood risk data to guide construction and insurance decisions.

14 NFIP maps are available through FEMA’s Map Service Center, which is located at http://msc.fema.gov.
15 Before FEMA began its map modernization programs, many Flood Insurance Risk Maps (FIRMs) were 20-25 years
old and did not accurately reflect residual risk behind or below flood control structures, giving residents living behind
them a false sense of security.
16 Special Flood Hazard Areas are defined as Zones A, AO, A1-A30, AE, AR, AR/AO, AR/A1-A30, AR/AE, AR./AH,
Ar/A99, A99, AH, VO, V1-V30, VE, and V. These zones are highly susceptible to flooding. V-lettered zones are also
subject to wave action. Older maps use Zones B and C to represent areas of moderate and low flood risk. Newer maps
have replaced these designations with Zone X (shaded) and Zone X (unshaded), respectively.
17 A stage-damage curve is an estimate of damages as a percentage of value based on the depth of flooding experience.
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FEMA used these data to create Flood Insurance Rate Maps (FIRMs) that outline a community’s
different flood risk areas, including the highest flood risk areas, known as Special Flood Hazard
Areas (SFHA) that would be inundated by a flood having a 1% or greater chance of occurring in
any given year. The 1%-annual-chance flood is a flood insurance standard, not a public safety
standard.
Financial Status
This section examines the current financial status of the program and borrowing from the U.S.
Treasury.
Table 2 shows that the NFIP currently has more than 5.6 million policies-in-force nationwide
covering approximately $1.2 trillion in property in almost 20,000 participating communities.
Policyholders paid $3.35 billion in premiums in 2011. The NFIP experienced only one
catastrophic loss year, in 2005, in its 42-year history, and the Midwest floods of 2008 severely
tested the financial resiliency of the NFIP. In an attempt to both protect the NFIP’s integrity after
the 2005 hurricanes and ensure FEMA had the financial resources to cover its existing
commitments, Congress passed, and the President signed into law, legislation to increase the
NFIP’s borrowing authority to allow the agency to continue to pay flood insurance claims: first to
$3.5 billion on September 20, 2005; to $18.5 billion on November 21, 2005; and finally to
$20.775 billion on March 23, 2006. FEMA had to borrow another $2.6 billion over the 2007
through 2009 period to pay claims from Hurricane Ike and the Midwest floods of 2008. The
program’s outstanding debt to the Treasury stands at $17.775 billion, as of January 31, 2011.
FEMA is not likely to be able to repay the debt because of the considerable amount of interest
associated with that level of borrowing. Interest payments on the program’s debt to the Treasury
are almost $1 billion annually.
Table 2. NFIP Program Statistics
(as of January 31, 2011; $ nominal)
Number of
Total Payments
Calendar
Policies in
Total Written
Total Face Value Total Number
Made to
Year
Force
Premium
of Coverage
of Claims Paid
Policyholders
1972-1977 NA
NA
NA
4,441 $18,035,658
1978 1,446,354
$111,250,585
$50,500,956,000
29,122
$147,719,253
1979 1,843,441
$141,535,832
$74,375,240,000
70,613
$483,281,219
1980 2,103,851
$159,009,583
$99,259,942,000
41,918
$230,414,295
1981 1,915,065
$256,798,488
$102,059,859,000
23,261
$127,118,031
1982 1,900,544
$354,842,356
$107,296,802,000
32,831
$198,295,820
1983 1,981,122
$384,225,425
$117,834,255,000
51,584
$439,454,937
1984 1,926,388
$420,530,032
$124,421,281,000
27,688
$254,642,874
1985 2,016,785
$452,466,332
$139,948,260,000
38,676
$368,238,794
1986 2,119,039
$518,226,957
$155,717,168,000
13,789
$126,384,695
1987 2,115,183
$566,391,536
$165,053,402,000
13,400
$105,432,378
1988 2,149,153
$589,453,163
$175,764,175,000
7,758 $51,022,523
1989 2,292,947
$632,204,396
$265,218,590,000
36,245
$661,658,285
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Number of
Total Payments
Calendar
Policies in
Total Written
Total Face Value Total Number
Made to
Year
Force
Premium
of Coverage
of Claims Paid
Policyholders
1990 2,477,861
$672,791,834
$213,588,265,000
14,766
$167,896,816
1991 2,532,713
$737,078,033
$223,098,548,000
28,549
$353,681,702
1992 2,623,406
$800,973,357
$236,844,980,000
44,650
$710,225,154
1993 2,828,558
$890,425,274
$267,870,761,000
36,044
$659,059,461
1994 3,040,198
$1,003,850,875
$295,935,328,000
21,583
$411,075,128
1995 3,476,829
$1,140,808,119
$349,137,768,000
62,441
$1,295,578,117
1996 3,693,076
$1,275,176,752
$400,681,650,000
52,677
$828,036,508
1997 4,102,416
$1,509,787,517
$462,606,433,000
30,338
$519,537,378
1998 4,235,138
$1,668,246,681
$497,621,083,000
57,348
$886,327,133
1999 4,329,985
$1,719,652,696
$534,117,781,000
47,247
$754,970,800
2000 4,369,087
$1,723,824,570
$567,568,653,000
16,362
$251,720,536
2001 4,458,470
$1,740,331,079
$611,918,920,000
43,589
$1,277,002,489
2002 4,519,799
$1,802,277,937
$653,776,126,000
25,312
$433,644,094
2003 4,565,491
$1,897,687,479
$691,786,140,000
36,838
$780,492,440
2004 4,667,446
$2,040,828,486
$765,205,681,000
55,825
$2,232,042,331
2005 4,962,011
$2,241,264,140
$876,679,658,000
212,778
$17,713,105,660
2006 5,514,895
$2,604,844,133
$1,054,087,148,000
24,592
$640,623,771
2007 5,655,919
$2,843,422,049
$1,141,242,230,000
23,129
$612,351,594
2008 5,684,275
$3,066,729,200
$1,197,659,846,000
74,266
$3,450,249,017
2009 5,704,198
$3,202,267,224
$1,233,005,263,000
30,821
$772,390,723
2010 5,559,313
$3,348,222,091
$1,227,932,424,400
27,165
$708,992,043
Source: U.S. Department of Homeland Security, FEMA’s Office of Legislative Affairs.
NFIP Treasury Borrowing
Table 3 shows the history of U.S. Treasury borrowing and repayments under the NFIP from 1981
to 2010. The NFIP was self-supporting from 1986 until 2005, covering all administrative
expenses and claim payments out of premium income and fees. Since Hurricane Katrina struck in
August 2005, FEMA has had to borrow $19.64 billion, which includes amounts to pay claims
from Hurricanes Ike and the 2008 Midwest floods. It appears unlikely that the $17.775 billion in
debt to the U.S. Treasury, as of January 31, 2011, will be repaid within the next 10 years given
annual interest payments of about $900 million and annual premium income of approximately
$3.1 billion. Experts agree that even if FEMA increased flood insurance rates up to the maximum
amount allowed by law (10% per year), the program would still not have sufficient funds to cover
future obligations for policyholder claims, operating expenses, and interest on debt.
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Table 3.History of U.S. Treasury Borrowing Under the National Flood
Insurance Program
(as of January 31, 2011; $ nominal)
Fiscal Year
Amount Borrowed
Amount Repaid
Cumulative Debt
Prior to 1981a
$917,406,008 $0 $917,406,008
1981 $164,614,526
$624,970,099
$457,050,435
1982 $13,915,000
$470,965,435
$0
1983 $50,000,000
$0
$50,000,000
1984b
$200,000,000 $36,879,123 $213,120,877
1985 $0
$213,120,877
$0
1986-1993 $0
$0
$0
1994c
$100,000,000
$100,000,000
$0
1995 $265,000,000
$0
$265,000,000
1996 $423,600,000
$62,000,000
$626,600,000
1997 $530,000,000
$239,600,000
$917,000,000
1998 $0
$395,000,000
$522,000,000
1999 $400,000,000
$381,000,000
$541,000,000
2000 $345,000,000
$541,000,000
$345,000,000
2001 $600,000,000
$345,000,000
$600,000,000
2002 $50,000,000
$640,000,000
$10,000,000
October 2002
$0
$10,000,000
$0
2003 (Nov-Sep)
$0
$0
$0
2004 $0
$0
$0
2005d
$300,000,000 $75,000,000 $225,000,000
2006
$16,660,000,000
$0
$16,885,000,000
2007
$650,000,000
$0
$17,535,000,000
2008 $50,000,000
$225,000,000
$17,360,000,000
2009
$1,987,988,421
$347,988,421
$19,000,000,000
2010 $0
$500,000,000
$18,500,000,000
2011 to date
$0
$750,000,000
$17,750,000,000
Total $23,707,523,955
$5,957,523,955
$17,750,000,000
Source: U.S. Department of Homeland Security, Federal Emergency Management Agency’s Office of Legislative
Affairs.
Notes: Borrowings through 1985 were repaid from congressional appropriations. The NFIP did not borrow in
from 1986 through 1993. Since 1994, borrowings are repaid from premium and other income. The existing debt
outstanding is expected to be repaid with premium income or with congressional appropriations.
a. Balance forward from U.S. Department of Housing and Urban Development.
b. Figure for the $213.1 million in cumulative debt in 1984 provided by FEMA reflects additional cost outside
of the insurance program.
c. Of the $100 million borrowed, only $11 million was needed to cover obligations.
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d. NFIP borrowed $300 million in 2005 to pay claims from the 2004 hurricane season, but Hurricanes Katrina,
Rita and Wilma struck on August 29, 2005, and claims were submitted after the 2006 fiscal year began.
Factors Affecting Financial Solvency
Homeowners are required to purchase flood insurance coverage if they have a federally insured
mortgage. Many policyholders, however, cancel their NFIP policy after a few years pass and they
have not experienced a flood loss. As a result, when a flood hazard does occur, there are often a
large number of uninsured flood victims and the federal government is usually called upon to
provide disaster assistance. In order to stabilize future government spending to compensate flood
victims, it is important to maintain the long-term financial solvency of the NFIP. In considering
the NFIP’s financial solvency, it may be useful to recognize two things: (1) the NFIP was not
capitalized at inception by Congress; and (2) the program does not operate under the traditional
insurance definition of fiscal solvency that requires the insurer to have sufficient capital/surplus
to obtain authorization to sell insurance policies.
With respect to the financial solvency of the NFIP, several issues may be of interest to Congress,
including the following:
• flood insurance premium discount (i.e., actuarial soundness and premium rate
adequacy);
• repetitive loss properties’ disproportionate share of total losses in the program;
• lack of enforcement of mandatory flood insurance purchase requirements;
• impact of outdated flood maps on the program;
• enforcement of floodplain management regulations; and
• debate over the inclusion of optional windstorm coverage in the NFIP policy.
The next six sections examine each of these concerns.
Flood Insurance Premium Discounts
The NFIP arguably faces a long-term solvency challenge because the program does not have a
financing mechanism for handling catastrophic losses other than borrowing from the federal
Treasury; annual premiums are not likely to cover the program’s long-term expenses, claim costs,
and interest and principal debt repayment to the U.S. Treasury. Taxpayers could therefore be
exposed to greater financial risks as a result of the potential for future catastrophic flooding.18
NFIP was not established on an actuarially sound basis since it charges less-than actuarial rates
for pre-FIRM structures. FEMA’s rate-setting structure is designed to generate premiums at least
sufficient to cover losses and loss adjustment expenses relative to the “historical average loss
year.”19 There is no contingent amount added to premium for profit margins in order to build a

18 U.S. Government Accountability Office, FEMA’s Rate-Setting Process Warrants Attention, GAO-09-12, October 31,
2008.
19 In contrast, commercial insurance premiums are typically set at a level that covers expected losses and expenses plus
an amount for a profit margin. A portion of each premium dollar collected is then set aside in loss reserves which are
invested and the income used to pay claims and expenses.
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surplus. When losses and expenses exceed premiums the program is authorized to borrow from
the U.S. Treasury but must repay the funds with interest. Thus, because the program does not
build loss reserves for the infrequent but very catastrophic loss years and rates are by statute
underpriced to make rates affordable, the program’s financial structure could impose negative
externalities on taxpayers. Federal taxpayers ultimately subsidize any financial shortfalls created
by the NFIP’s financial structure and the tendency to underprice the insurance coverage.
The NFIP uses a two-tier rate classification system that consists of “actuarial” rates and
“subsidized” rates.20 Actuarial flood insurance premiums are calculated based on the amount of
coverage, location, age, and building occupancy and, for a building in a SFHA, the elevation of
the building. Based on expected losses derived from flood probability estimates and adding
expected loss adjustments and other operating expenses (i.e., risk loading), FEMA is able to
calculate an actuarial rate. Buildings constructed after December 31, 1974, or after the publication
of a flood insurance rate map (FIRM) are charged an actuarial premium that reflects the
property’s risk of flooding.
Subsidized rates, on the other hand, are determined by a statutory mandate that requires rates to
be affordable so individuals are encouraged to participate. Owners of properties built prior to the
issuance of a community’s flood hazard map or January 1, 1974, usually pay subsidized rates and
are exempted from the NFIP’s floodplain management standards. Even properties that are
remapped into higher-risk areas pay the subsidized rates, which further contributes to the
financial inadequacies of the NFIP.
Premium subsidies were initially considered necessary because occupants often did not
understand the flood risk when they built in floodplains (flood maps were not available), there
were no public safeguards prohibiting the occupancy on the floodplain, and premium subsidies on
pre-FIRM structures could provide an incentive to local communities to participate in the
program and discourage unwise future floodplains construction. Premium subsidies were
intended to be phased out over time as the number of pre-FIRM properties gradually diminished
when they were damaged and rebuilt or relocated under stronger floodplain management and
building codes. The NFIP requires all new and substantially improved buildings to be constructed
at or above the elevation of the 1%-annual-chance flood (100-year floodplain).
Repetitive Flood Loss Properties
Properties that experience repetitive flood losses, known as a “repetitive-loss properties” (RLP)
and “severe repetitive loss properties”(SRLP), account for a disproportionately large share of all
the flood insurance claims filed and paid under the NFIP.21 Historically, it is estimated that
approximately 1% of the properties insured under the NFIP have accounted for over a third of
claims paid. About one in 10 homes that suffer repetitive flood damages have cumulative flood

20 A third category of premium discounts involve “grandfathered” policies that occur when a structure is built in
compliance with the local floodplain regulation in effect at the time of construction but is later placed in a different risk
zone when a flood map is changed. The structure is grandfathered so that pre-FIRM structures continue to pay the
subsidized rates.
21 A repetitive loss property (RLP) is defined as an insured property that experiences two or more flood losses greater
than $1,000 within any 10-year period. A subset of RLPs, called severe repetitive loss properties (SRLP), have incurred
at least four NFIP claim payments of at least $5,000 each or the cumulative amount of such claims payments exceeds
$20,000 or for which at least two separate claims have been made with the cumulative amount of the building portion
of such claims exceeding the market value of the building.
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insurance claims that have exceeded the value of the house.22 FEMA approximates that 90% of all
RLPs were built prior to December 31, 1974, or before the adoption of a FIRM—and, hence, are
subject to premium discounts. Importantly, the annual increase in new RLPs is outpacing FEMA
mitigation efforts by a factor of 10 to 1. After the 1993 Midwest flood, FEMA and other federal
government agencies spent hundreds of millions to remove frequently flooded properties from the
floodplain.
Table 4 shows that since 1978, a total of 157,225 RLPs have had 461,580 claims paid, which
have cost the National Flood Insurance Fund a total of $11.1 billion in nominal dollars. The
Appendix A shows RLPs by state. The average claim for these properties was $24,035.
Table 4.Total Repetitive Flood Loss Properties in the NFIP: 1978 - 2011
(as of January 31, 2011: $ nominal)
Building Payments
$8,480,003,703
Contents Payments
$2,614,161,770
Total payments
$11,094,165,472
Average payment
$24,035
Number of Losses
461,580
Number of Properties
157,225
Source: U.S. Department of Homeland Security, Federal Emergency Management Agency.
FEMA has undertaken several actions over the years to address the RLP problem. The initial
strategy, announced in 1999, was to identify the nation’s inventory of RLPs and focus on
structures that were substantially damaged (i.e., damaged 50% or more of market value) at which
time they would be reconstructed, elevated, or floodproofed to prevent future damage. One
reported difficulty has been reluctance and inconsistency at the local community level in
declaring structures substantially damaged.
FEMA also pursued a strategy of phasing out premium subsidies on RLPs through voluntary
buyouts or the imposition of full actuarially based rates for RLP owners who refuse to accept
FEMA’s offer to mitigate the effect of flood damage. In addition, the agency incorporated special
incentives into the Community Rating System and provided data to states and communities to
help them address the RLPs.
The Flood Insurance Reform Act of 2004 required FEMA to establish the Repetitive Flood
Claims and the Severe Repetitive Loss Grant programs to provide funding to reduce or eliminate
the long-term risk of flood damage under the NFIP. The RFC grant program provides grants to
help states provide subgrants to local government to acquire properties and either demolish or
relocate the structure, or elevate or otherwise floodproof the structure. Congress has appropriated
$10 million annually to the RFC grant program since 2006. Going forward, a policy challenge
will be to find a way to mitigate RLP given that FEMA cannot directly compel property owners in
flood hazard areas to mitigate losses or impose actuarial rates on RLP.

22 U.S. Department of Homeland Security, Office of Inspector General, “FEMA’s Implementation of the Flood
Insurance Reform Act of 2004,” OIG-09-45, March 26, 2009, p. 4, at http://www.dhs.gov/xoig/assets/mgmtrpts/
OIG_09-45_Mar09.pdf.
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Mandatory Flood Insurance Purchase Requirement
FEMA lacks nationwide data on the number of properties in floodplains: it is therefore difficult to
make an accurate assessment of NFIP market penetration. However, estimates of penetration rates
in the 100-year floodplain are arguably consistently low. A 2006 Rand Corporation study
estimated that about 49% of properties in SFHAs purchased NFIP flood insurance, and 1% of
properties outside SFHAs purchased insurance.23 Concerns have also been expressed about the
large number of homes that are not mortgaged and thus are not required to be insured against
flood risks. The low participation rates in flood-prone areas may be of concern to Congress.
The intent and success of the NFIP rests on making insurance widely available and property
owners and renters purchasing coverage. Since 1973, federal regulations have required flood
insurance on all structures located in the 1% annual chance floodplain (100-year floodplain).
Also, since 1994, recipients of certain flood disaster assistance have been required to purchase
and hold flood insurance to protect against future flood losses, under penalty of receiving no
federal disaster aid in subsequent floods.24 Despite the existence of this mandatory flood
insurance purchase requirement, take-up rates for flood insurance have historically been low and
the federal government’s exposure to uninsured property losses from flooding remains
substantial. There are at least five possible explanations for the low market penetration for flood
insurance: (1) flood insurance is not seen as being worth the cost (i.e., a poor investment); (2) the
individual has misperceptions about low-probability risks and lacks information about the NFIP;25
(3) private insurance agents do not market NFIP policies; (4) lack of compliance with the
mandatory purchase requirement or failure to ensure that property owners maintain coverage for
the life of the loan; and (5) many homeowners in risky areas either do not have a mortgage or
have a mortgage from an unregulated lender that is not subject to the mandatory purchase
requirement.
Flood Hazard Mapping
FEMA is required by statute to identify and map the nation’s floodplain areas and to establish
flood-risk zones in such areas. FIRMs are used for setting flood insurance rates, regulating
floodplain development and communicating information about the 1%-annual-chance flood
hazard to those who live in floodplains. FIRMs also are used to determine whether property
owners are required by law to obtain flood insurance as a condition of obtaining mortgage loans
or other federally related financial assistance. Without accurate and updated flood hazard maps,
property owners and small businesses could underestimate their exposure to flood risks and make
poor financial decisions about protecting their properties (i.e., where to build and whether to
purchase flood insurance or take other measures to protect their properties).
A major challenge facing the NFIP is ensuring the accuracy of the nation’s inventory of FIRMS
and improving the mapping, communication, and management of flood-related data. Other flood
risk assessment and mapping issues that may be of concern to Congress include (1) the sudden
inclusion in a floodplain that can result from FEMA Map Modernization program; (2) large areas

23 Rand Institute for Civil Justice, “The National Flood Insurance Program’s Market Penetration Rate: Estimates and
Policy Implications,” at http://www.rand.org/pubs/technical_reports/2006/RAND_TR300.pdf.
24 CRS Report RS22945, Flood Insurance Requirements for Stafford Act Assistance, by Edward C. Liu.
25 Howard C. Kunreuther, “The Changing Societal Consequences of Risks from Natural Hazards.” Annals of the
American Academy of Political and Social Science 1979, vol. 443, pp. 104-116.
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that appear to be outside of SFHA that should actuarially be in the high-hazard area; (3) hazard
mitigation and local planning for capital investments behind suspect levees and below aging dams
so property owners will continue to be exempt from the mandatory purchase requirements;(4)
expiring Provisional Accredited levee agreements; and (5) certification/liability issues with levee-
like structures.26
When FEMA’s map modernization program began in 2003, nearly 70% of the nation’s 92,222
flood maps were more than 10 years old and many of these maps did not reflect the current flood
hazard risk or new estimation techniques.27 In many cases, water flow and drainage patterns have
changed due to surface erosion, land use, and natural forces. The probability of inland and
riverine flooding in certain areas has changed along with these factors. Most experts agree that
flood maps with high-accuracy and high-resolution land surface elevation data would be helpful.
The benefits of accurate flood hazard maps include improved risk zone designations as well as
insurance premiums and building restrictions that reflect actual flood risks facing individuals and
businesses.
The Map Modernization program called for FEMA to produce a new nationwide Flood Insurance
Study (FIS) and the accompanying FIRMs.28 FEMA is now completing the update and conversion
to digital food hazard maps using new technologies such as Light Detection And Ranging
(LiDAR) and other remote sensing technologies within a geographic information system (GIS)
format to systematically update floodplain maps on a watershed scale.
Any community that currently participates in the NFIP, or is now identified as having flood
hazard prone areas in the FIS and on the new FIRMs, must officially adopt the county-wide FIS
and the accompanying FIRMs. Such official action is the most critical community action that
FEMA requires of all communities having flood hazard prone areas. Any participating
community failing to meet the FEMA map adoption deadline faces immediate suspension or
sanctions from the NFIP.
In October 2008, FEMA announced the discontinuation of the paper FIRMS, FIS reports, and
related flood hazard map products.29 Only digital map images and digital geospatial flood hazard
data will be distributed by FEMA and are equivalent to the paper maps for official activities under
the NFIP. The paper maps will still be available through the FEMA Map Service Center. This
change is expected to result in printing and distribution cost savings for FEMA during the map
modernization process by eliminating the need to generate large format film negatives to support
offset printing.30 FEMA has also announced its Risk Mapping, Assessment, and Planning Strategy
aims to follow-up to the Map Modernization initiative. The new strategy aims to combine flood
hazard mapping, risk assessment tools, and mitigation planning into one seamless program.

26 National Committee on Levee Safety, Recommendations for a National Levee Safety Program: A Report to Congress
from the National Committee on Levee Safety
, January 15, 2009, at http://www.iwr.usace.army.mil/ncls/docs/NCLS-
Recommendation-Report_012009_DRAFT.pdf.
27 U.S. Government Accountability Office, Flood Map Modernization: Federal Emergency Management Agency’s
Implementation of a National Strategy
, GAO-05-894, July 12, 2006.
28 For more information on FEMA’s Map Modernization, see FEMA Map Modernization: An Overview,
http://www.fema.gov/plan/prevent/fhm/mm_main.shtm.
29 U.S. Department of Homeland Security, Federal Emergency Management Agency,FEMA: Availability of Flood
Hazard Maps and Data,” Federal Register, vol. 73, no. 206, October 23, 2008, p. 63184.
30Ibid.
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Floodplain Management Regulations
FEMA is prohibited from providing flood insurance to property owners residing in communities
that do not participate in the NFIP.31 Local communities must adopt and enforce certain minimum
floodplain management ordinances as a condition of participation in the NFIP. FEMA estimates
that $1.2 billion in flood losses are avoided each year from community floodplain management
requirements. Efforts to guide construction and development away from high-risk areas through
community-based land use and zoning ordinances, however, have reportedly been subordinated to
building and elevation requirements that lead to further development of the floodplains, according
to the National Wildlife Federation.32 Even in hazard-prone floodways and coastal areas, building
and rebuilding are allowed under NFIP standards, with the cost of insurance varying with
property elevation.
An important floodplain management issue for the 112th Congress is reconciling FEMA’s
implementation of its policy on federal assistance for recovery and hazard mitigation projects
located in coastal velocity zones—the so-called V zones on FIRMS—with that of other federal
departments and agencies charged with implementing Executive Order 11988.33 President Jimmy
Carter signed into law E.O. 11988 to require federal agencies to avoid direct and indirect support
of floodplain development by taking action “to reduce the risk of flood loss, to minimize the
impact of floods on human safety, health and welfare, and to restore and preserve the natural and
beneficial values served by floodplains in carrying out its responsibilities.”34
Although the regulatory guidelines for E.O. 11988 are clearly outlined in 44 CFR Part 9, there has
arguably been a lack of clarity in interpreting those guidelines to determine whether officials are
to support recovery and community development in V Zones. FEMA staff must (1) determine
eligibility and required elevation of all new construction in coastal high hazard areas on the Gulf
Coast; and (2) decide whether new structures or the costs of repair or replacement of facilities in
V Zones are eligible for FEMA funding. The decision to approve and obligate FEMA recovery
funds for public assistance projects located in V Zones is an essential element in the
reconstruction or redevelopment of coastal areas devastated by Hurricane Katrina.
Federal Multi-Peril Insurance Program
In the aftermath of Hurricanes Katrina and Rita, individuals and businesses in Louisiana,
Mississippi, and Alabama protested against what they claimed were inappropriate obstacles to the
payment of their property damage insurance claims. When insurance adjustors and damage
experts assessed the properties damaged by Hurricane Katrina, they were faced with the issue of
allocating damages between wind (a covered loss) and flood (an excluded loss). Post-Katrina
insurance claims litigation and the delays and economic uncertainty generated for consumers and

31 44 CFR 59.21.
32National Wildlife Federation, Heavy Rainfall and Increased Flooding Risk: Global Warming’s Wake-up Call for the
Central United States
, 2008, at http://www.nwf.org/extremeweather/pdfs/Heavy_Rainfall_and_Increased_Flooding-
Wake-Up_Call_for_Central_U.S2.pdf.
33 U.S. Department of Homeland Security, Office of Inspector General, “FEMA Policy Related to Coastal Velocity
Zones,” OIG-09-71, May 27, 2009, at http://www.dhs.gov/xoig/assets/mgmtrpts/OIG_09-71_May09.pdf.
34 U.S. President Jimmy Carter, “Floodplain Management” Executive Order 11988, Federal Register, May 24, 1977, p.
26951, at http://www.fema.gov/plan/ehp/ehplaws/attachments-laws/eo11988.pdf.
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insurers raised concerns about post-event judicial interpretations of the scope of insurance
coverage.
One issue of contention that emerged from the wind vs. water claims dispute was the interest in
expanding the NFIP to allow policyholders to purchase optional wind coverage. Proponents of
adding the wind peril provision argue it is necessary to eliminate coverage disputes when wind
and flood both contribute to a loss. Optional wind coverage is also said to be needed because of
the difficulty that property owners have in obtaining affordable private wind coverage in states
along the Gulf and Atlantic coasts. Private insurers have dramatically increased premiums and
deductibles, reduced coverage or withdrawn altogether from these areas out of concern about
catastrophic risk exposure. In those areas, homeowners must instead purchase their wind
coverage from state pools, where the premiums can be prohibitively expensive.
Opponents of adding wind coverage to the NFIP believe that there is adequate wind coverage
capacity in every state through either the traditional private market or through the state residual
market program (e.g., wind pools). Some critics of the optional wind proposal would instead like
to see the development of federal programs to provide economic incentives to encourage the
adoption and enforcement of stronger building codes and other loss mitigation efforts. According
to these critics, expanding the NFIP to add wind coverage would dramatically increase the
exposure of the NFIP, losses to the federal government and the potential for huge taxpayer
subsidies. Concerns have also been expressed about the NFIP’s ability to determine actuarially
sound rates for the windstorm portion of this coverage and avoid wide-scale financial deficits in
the program following a catastrophic flood event. Even if actuarial rates are implemented they
may not produce sufficient premium income to bear program administration costs and losses in
the event of a catastrophic event.
The Government Accountability Office (GAO) issued a report in 2008 that outlined some
difficulties that FEMA could face in implementing an optional wind coverage provision. Some of
the obstacles included (1) the concern about “adverse selection” or the likelihood that only those
property owners at highest risk would purchase coverage; (2) wind hazard prevention standards
that communities would have to adopt in order to receive coverage; (3) uncertainty about the
adoption of programs to accommodate wind coverage; (4) difficulties in establishing a new rate-
setting process; (5) enforcement of new building codes; and (6) administration and oversight of
the program.35
Reauthorization of the NFIP
The NFIP has been reauthorized many times since the program’s inception. Appendix B shows
that since September 2008, there have been 11 short-term extensions on three occasions in 2010,
Congress allowed the NFIP to lapse, but then Congress extended it retroactively.36 On May 31,

35 U.S. Government Accountability Office, GAO-08-504, National Catastrophe Insurance: Analysis of Proposed
Combined Federal Flood and Wind Insurance Program
, April 25, 2008.
36 In 2004, Congress passed the Bunning-Bereuter-Blumenauer Flood Insurance Reform Act to reauthorize the NFIP
through September 30, 2008 (P.L. 108-264; 118 Stat. 712). On September 30, 2008, President George W. Bush signed
into law H.R. 2638, the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act of 2009 (P.L.
110-329; 122 Stat. 3575, 3581), that included a provision to extend the NFIP’s authority to issue new policies, increase
coverage on existing policies, and issue renewal policies until March 6, 2009. After approving a five-day continuing
resolution that Congress passed and President Barack Obama signed into law on March 6, 2009 (P.L. 111-6; 123 Stat
522), Congress passed the Omnibus Appropriations Act of 2009, extending the NFIP through September 30, 2009 (P.L.
(continued...)
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2010, for example, FEMA’s authorization to issue flood insurance policies under the NFIP lapsed
for the third time in 2010, causing the program to experience a hiatus—a period without authority
to issue new or renewal policies or increase coverage on existing policies.37
A lapse in NFIP authority could be of concern to policymakers for several reasons. First, access to
a stable supply of flood insurance is important for the recovery of parts of the U.S. housing
market, and helps to address a risk to the banking industry’s loan portfolios. Second, access to
flood insurance remains critical to the government’s mandatory flood insurance purchase
requirement given that homebuyers need to purchase flood insurance as a condition for obtaining
mortgage financing from federally regulated lenders on loans that are or will be secured by
property located in Special Flood Hazard Areas (SFHA). Third, access to federal flood insurance
is critical to ensure that appropriate claims are paid for the more than 5.6 million existing NFIP
policyholders who depend on the NFIP as their main source of protection against flooding.
Options for Managing and Financing Flood Risk
Despite investing significant resources in managing flood risk and minimizing future disaster
relief costs, the United States has not been able to curb the rising costs of flood damage. This was
the conclusion of the Gilbert F. White National Flood Policy Forum held in November 2007 at
George Washington University. The Forum brought together 92 diverse experts to consider the
future of floodplain management under a “business-as-usual scenario” and under an alternative
scenario of aggressive action to address increasing flood risk in the nation. The experts at the
forum concluded that (1) an unprecedented set of conditions (e.g., population growth and
migration, changes in climate, and degradation of water-based resources) now face the United
States that could increase flood losses more rapidly in the near future; and (2) existing programs
and policies at all levels are short-sighted, fragmented, focused on economic development at the
expense of sustainability and that future losses must be managed more pro-actively than in the
past.38
What might the policy response be to the current financial and management challenges facing the
NFIP? There are at least five options.
Reform and modernize the NFIP. Reform of the NFIP could include (1) a
gradual phase in of actuarial rates for non-residential properties, non-primary
residences and RLPs; (2) strengthening floodplain management regulations
designed to restrict development in high-risk areas, and require new construction
to be elevated three feet above the base flood elevation (BFE); (3) authorizing an
ongoing program to review, update, and maintain flood insurance program maps

(...continued)
111-8; 123 Stat. 988). On July 29, 2009, the House considered and passed H.R. 3139 under suspension of the rules to
reauthorize the NFIP through March 6, 2010. On March 2, 2010, Congress passed and the President signed into law
H.R. 4691, which extended the NFIP through March 28, 2010. On April 15, Congress passed P.L. 111-157 to extend
the program to May 31, 2010. On July 2, 2010, President Obama signed into law H.R. 5569 (P.L. 111-196) to extend
the program through September 30, 2010.
37 Flood insurance policies that were in force on the last day of effective Program authorization (May 31, 2010)
remained in force and claims under those policies were paid during the hiatus.
38 Association of State Flood Plain managers, Floodplain Management 2050: A Report of the 2007 Assembly of the
Gilbert F. White National Flood Policy Forum
, November 6-7, 2007.
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and include 500-year floodplains and areas that are behind levees, downstream of
a dam, or in a coastal area that could see a major hurricane; (4) strengthening and
enforcing mandatory insurance purchase requirements; (5) forgiving the full debt
owed by the NFIP to the Treasury; (6) eliminating the current subsidy for older
structures and expand to include areas where a flood or storm surge is likely if a
weather event reaches catastrophic levels; (7) creating a catastrophe reserve fund
for extremely rare catastrophic loss years; and (8) encouraging private sector
incentives for participation.
Long-term flood insurance contracts (LTFI). LTFI coupled with mitigation
loans arguably would encourage investment in risk-reduction measures.39 The
idea is for private insurers to offer 5-, 10-, or 20-year flood insurance contracts
combined with long-term mitigation loans (e.g., for retrofitting, elevation, and
floodproofing of structures) tied to the mortgage. Mitigation loans would be
offered to help finance the high upfront costs associated with investing in
mitigation measures. The long-term flood insurance policies would have a
maturity that corresponds to the length of the mortgage on the property and the
policy would not terminate when the property owner sells the property.
The economic rationale for using LTFI to pre-fund disaster costs is that insurers,
generally, need guaranteed premiums for a long time period if rates are to be
based on expected losses. By lengthening the term of the property insurance
contract, and spreading the risk through a mandatory purchase requirement, LTFI
contracts could implicitly permit insurers to compensate for their present inability
to prepare adequately for rare and unpredictable flood events.
Shift flood insurance back into the private sector. FEMA has a responsibility
to examine the NFIP’s contingent liabilities and recommend ways to provide
financial stability to the federal flood insurance program. This activity is
performed in conjunction with the program’s annual rate-setting process.
Recognizing the shortcomings of the current financing arrangement, two basic
alternatives have emerged: an all-hazard insurance approach and a federal-
insurance (reinsurance) framework that would enable private insurers to cover
more flood risks.
With the development of computer simulation catastrophe risk models and
remote sensing technologies, some private insurers have argued that flood
hazards are now insurable by private companies working in partnership with
government. Some economists have suggested that floods and other catastrophic
risks are now insurable because of insurer’s ability to transfer catastrophic risks
to the capital markets through securitization of the risk. In this context, FEMA
could require private insurers to “make available” private flood insurance
policies at actuarially determined prices in flood-prone areas with the federal
government providing federal reinsurance. FEMA could also open the NFIP to a
competitive bid contractor to have one firm take over the entire Write-Your-Own
program and the government reinsure the risk. H.R. 1309, introduced in the 112th
Congress, would require FEMA and the U.S. Government Accountability Office

39 See Carolyn Kouky and Howard Kunreuther, “Improving Flood Insurance and Flood Risk Management: Insights
from St. Louis, Missouri,” Resources for the Future, February 2009, at http://www.rff.org/rff/documents/rff-dp-09-
07.pdf.
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(GAO) to study the option for privatization of the program and report to
Congress.
In 2000, FEMA undertook a study with the assistance of accounting firm Deloitte
& Touche to explore alternative financing arrangements to reduce the need for
U.S. Treasury borrowing.40 FEMA was concerned about the NFIP’s erratic cash
flow and the potential for catastrophic losses within a short period of time. The
option that received the most attention was to create a reinsurance vehicle to
finance catastrophic losses. After review by the Office of Management and
Budget (OMB), this option was not adopted because it was determined that the
cost to borrow from the U.S. Treasury was lower.
Community Group Flood Insurance Policy. The local community purchases a
group policy from the NFIP on behalf of residents in a designated SFHA.
Policies are issued to all residents and paid either through property taxes or as a
utility payment. Professor Dwight Jaffee at University of California, Berkley, and
Howard Kunreuther at the Wharton School, the University of Pennsylvania are
leading advocates for the long-term flood insurance contract proposal.41
Interstate Compacts for Flood Control and Management. In response to
recurring flooding on the Red River, Members of the 112th Congress may wish to
consider addressing the long-term flooding challenges facing residences along
the Red River Valley. One way to do this would be to create a Red River Valley
Interstate Compact Authority with the power to address water quality and
flooding issues in the Red River watershed.42 Some disaster experts believe this
could potentially serve as a model for the nation. Officials from North Dakota,
South Dakota, and Minnesota envision this entity as an efficient and cost-
effective approach to handling the high cost of maintaining dams and levees, land
purchases for water retention, diversion of the river, and reducing the time it
takes to complete water management projects. Before any request for an
interstate compact were presented to Congress, the state legislatures in North
Dakota, South Dakota, and Minnesota might need to approve separate resolutions
to set up the compact. The status quo is an ad hoc approach with multiple states
each responding to its own flood hazards and the federal government providing
post-disaster relief assistance.


40 Federal Emergency Management Agency, National Flood Insurance Program: Discussion of Financial Stabilization
Possibilities
, FEMA Unpublished Internal Document, November 20, 2000.
41 Dwight Jaffee and Howard Kunreuther and E. Michael-Kerja, “Long-Term Insurance for Addressing Catastrophic
risk,” National Bureau of Economic Research Working Paper, August 2008.
42 Officials Seek Long-Term Solution for Red River Flood Control, by Dan Gunderson, January 20, 2010, located at
http://minnesota.publicradio.org/display/web/2010/01/19/red-river-flood-plans/.
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Appendix A. National Flood Insurance Program:
Repetitive Flood Loss Properties

Table A-1.Repetitive Flood Loss Properties in the National Flood
Insurance Program
(as of January 31, 2011; $ nominal)
State Name
Building Payments Contents Payments
Total Payments
Average Payment Losses Properties
Alabama
$400,834,596.31
$80,774,339.67
$481,608,935.98
$35,125.73
13,711
4,808
Alaska 750,670.54
113,603.42
864,273.96
11,839.37
73
28
Arizona 7,450,558.54
1,337,779.96
8,788,338.50
14,845.17
592
257
Arkansas 23,011,224.88
8,117,340.97
31,128,565.85
17,920.88
1,737
613
California 152,307,758.95
37,285,339.66
189,593,098.61
21,105.77
8,983
3,265
Colorado 951,272.38
334,658.34
1,285,930.72
10,046.33
128
55
Connecticut 50,471,305.22 17,807,466.90
68,278,772.12
15,574.54
4,384
1,467
Delaware 21,918,262.36
12,592,486.65
34,510,749.01
34,894.59
989
363
District Columbia
595,978.08
16,919.85
612,897.93
18,572.66
33
14
Florida 1,066,643,326.93
282,305,083.66
1,348,948,410.59
32,266.09
41,807
16,475
Georgia 102,514,382.18
26,662,103.48
129,176,485.66
29,736.76
4,344
1,602
Guam 350,626.18
52,467.45
403,093.63
13,899.78
29
14
Hawai 9,633,475.42
2,243,355.12
11,876,830.54
24,846.93
478
168
Idaho 577,539.26
99,298.69
676,837.95
11,669.62
58
23
Illinois
117,408,150.37 25,182,703.84 142,590,854.21 12,355.16 11,541 3,813
Indiana 50,097,108.25
10,006,920.62
60,104,028.87
16,062.01
3,742
1,384
Iowa 48,431,623.76
11,606,692.82
60,038,316.58
23,162.93
2,592
1007
Kansas 20,209,688.27
9,079,441.57
29,289,129.84
23,831.68
1,229
434
Kentucky 81,816,969.44
26,548,408.91
108,365,378.35
18,892.15
5,736
1,772
Louisiana 1,991,308,397.79
637,037,282.21
2,628,345,680.00
27,397.72
95,933
29,279
Maine 9,846,680.32
2,791,201.38
12,637,881.70
20,650.13
612
227
Maryland 40,063,422.42
15,207,780.67
55,271,203.09
26,083.63
2,119
883
Massachusetts 124,519,565.79 27,189,404.96 151,708,970.75 17,618.04 8,611
2,976
Michigan 12,650,629.95
5,025,034.94
17,675,664.89
10,817.42
1,634
636
Minnesota 21,705,222.50
3,628,123.23
25,333,345.73
16,460.91
1,539
622
Mississippi 433,058,921.46
129,521,515.24
562,580,436.70
32,809.26
17,147
5,976
Missouri 196,078,881.19
93,805,275.77
289,884,156.96
16,969.16
17,083
4,930
Montana 802,931.06
114,904.58
917,835.64
9,271.07
99
45
Nebraska 7,822,972.41
2,862,518.14
10,685,490.55
11,807.17
905
366
Nevada 6,955,148.57
3,435,927.12
10,391,075.69
59,377.58
175
76
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State Name
Building Payments Contents Payments
Total Payments
Average Payment Losses Properties
New Hampshire
17,200,468.92
2,663,197.29
19,863,666.21
23,043.70
862
337
New Jersey
459,644,468.67
162,088,184.02
621,732,652.69
18,990.00
32,740
10,322
New Mexico
1,187,339.29
60,885.43
1,248,224.72
13,716.76
91
39
New York
237,758,052.44
82,384,680.16
320,142,732.60
13,522.40
23,675
8,688
North Carolina
349,324,008.07
60,328,216.73
409,652,224.80
19,247.86
21,283
7,769
North Dakota
13,681,399.91
1,832,343.22
15,513,743.13
24,202.41
641
273
Ohio 72,300,428.51
24,711,627.74
97,012,056.25
17,635.35
5,501
1,990
Oklahoma 44,840,257.16
14,091,973.48
58,932,230.64
19,366.49
3,043
937
Oregon 17,510,705.12
5,702,259.30
23,212,964.42
25,965.28
894
341
Pennsylvania 333,353,670.62 107,637,434.18
440,991,104.80
24,447.89
18,038
6,587
Puerto Rico
15,938,654.24
38,547,251.72
54,485,905.96
8,882.61
6,134
2,093
Rhode Island
24,886,412.12
11,383,376.76
36,269,788.88
33,897.00
1070
384
South Carolina
70,507,605.94
15,534,613.84
86,042,219.78
22,987.50
3,743
1,480
South Dakota
2,927,068.46
466,431.54
3,393,500.00
14,627.16
232
106
Tennessee 45,051,665.47
13,031,536.49
58,083,201.96
19,843.94
2,927
1027
Texas 1,316,561,411.51
464,741,103.82
1,781,302,515.33
27,449.42
64,894
20,458
Utah 895,525.28
202,236.88
1,097,762.16
19,258.99
57
23
Vermont 1,894,526.85
563,161.71
2,457,688.56
14,372.45
171
72
Virgin Islands
11,932,975.99
22,051,880.60
33,984,856.59
50,125.16
678
251
Virginia 246,402,631.42
51,293,547.59
297,696,179.01
21,444.76
13,882
5,543
Washington 83,674,120.25 17,561,559.21
101,235,679.46
26,845.84
3,771
1,316
West Virginia
91,961,005.04
39,889,135.57
131,850,140.61
17,015.12
7,749
2,981
Wisconsin 19,575,744.44
4,578,718.28
24,154,462.72
16,785.59
1,439
621
Wyoming 206,266.45
31,034.15
237,300.60
10,786.39
22
9
Total
$8,480,003,702.95
$2,614,161,769.53
$11,094,165,472.48
$24,035.20
461,580
157,225
Source: U.S. Department of Homeland Security, Federal Emergency Management Agency.

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National Flood Insurance Program: Background, Challenges, and Financial Status

Appendix B. Chronology of Public Laws that
Reauthorized the National Flood Insurance Program

Presidential
Last Day of Effective
Lapse in NFIP
Signing Date
Public Law
Program Authority
Authority
September 30, 2008 P.L. 110-329; 122 Stat. 3575
March 6, 2009

H.R. 2638 (Price)—Consolidated
Security, Disaster Assistance, and
Continuing Appropriations Act, 2009
(Sec. 145)
March 6, 2009
P.L. 111-6; 123 Stat. 522
March 11, 2009

H.J.Res. 38 (Obey)—Continuing
Appropriations Resolution, 2009
March 11, 2009
P.L. 111-8; 123 Stat 988
September 30, 2009

H.Res. 184 (Obey)—Omnibus
Appropriations Act, 2009
October 1, 2009
P.L. 111-68; 123 Stat 2047
October 31, 2009

H.R. 2918 ( Wasserman Schultz)—
Legislative Branch Appropriations Act,
2010 (Sec. 129)
October 28, 2009
P.L. 111-83; 123 Stat. 2142
October 31, 2009

H.R. 2892 (Price)—Department of
Homeland Security Appropriations Act,
2010
October 30, 2009
P.L. 111-88; 123 Stat. 2904
December 18, 2009

H.R. 2996 (Dicks)—Department of the
Interior, Environment, and Related
Agencies Appropriations Act,2010
(Sec. 102)
December 19, 2010 P.L. 111-118; 123Stat. 3409
February 28, 2010
February 28, 2010
H.R. 3326 (Murtha)—Department of
Defense Appropriations Act, 2010
(Sec. 1005)
March 2, 2010
P.L. 111-144; 124 Stat 45
March 28, 2010
March 28, 2010
H.R. 4691 (Rangel)—Temporary
Extension Act of 2010 (Sec. 8)
April 15, 2010
P.L. 111-157; 124 Stat 1116
May 31, 2010
May 31, 2010
H.R. 4851 (Levin)—Continuing
Extension Act, 2010 (Sec. 7)
July 2, 2010
P.L. 111-196; 124 Stat 1352
September 30, 2010

H.R. 5569 (Waters)—National Flood
Insurance Program Extension Act
September 30, 2010 P.L. 111-250; 124 Stat 2630
September 30, 2011

Source: Congressional Research Service.
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National Flood Insurance Program: Background, Challenges, and Financial Status

Author Contact Information

Rawle O. King

Specialist in Financial Economics and Risk
Assessment
rking@crs.loc.gov, 7-5975


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