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INSIGHTi
National Flood Insurance Program Borrowing
Authority
Updated September 17, 2021
This Insight evaluates the National Flood Insurance Program (NFIP) borrowing authority to receive loans
from the Treasury and the current financial situation of the NFIP.
NFIP Funding
Funding for the NFIP is primarily maintained in an authorized account cal ed the National Flood
Insurance Fund (NFIF). The NFIP is funded from receipts from the premiums of flood insurance policies,
including fees and surcharges; direct annual appropriations for specific costs of the NFIP (only for flood
mapping); and borrowing from the Treasury when the NFIF’s balance has been insufficient to pay the
NFIP’s obligations (e.g., insurance claims). Since the end of FY2017, 16 short-term NFIP
reauthorizations have been enacted. For further details of these reauthorizations, see CRS Insight
IN10835, What Happens If the National Flood Insurance Program (NFIP) Lapses? The current
reauthorization is set to expire on September 30, 2021. These extensions did not increase the NFIP’s
borrowing limit or provide additional funds to the NFIP.
NFIP Borrowing Authority
The NFIP was not designed to retain funding to cover claims for truly extreme events; instead, the
National Flood Insurance Act of 1968 al ows the program to borrow money from the Treasury for such
events. For most of the NFIP’s history, the program has been able to cover its costs, borrowing relatively
smal amounts from the Treasury to pay claims and to repay the loans with interest. Only current and
future participants in the NFIP are responsible for repaying NFIP debt, as the insurance program itself
owes the debt to the Treasury and pays for accruing interest on that debt through the premium revenues of
policyholders. Since 2005, the NFIP has made six principal repayments totaling $2.82 bil ion and has paid
$5.26 bil ion in interest. The program paid $438.41 mil ion in interest in FY2020.
Table 1 shows NFIP borrowing, repayments, and debt from 1981 to 2021. Comparable figures are not
available before 1980. When the NFIP was established, the borrowing limit was $250 mil ion. In 1973,
the borrowing limit was increased to $500 mil ion, or $1 bil ion with Presidential approval. The
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borrowing limit was increased to $1.5 bil ion in 1996; however, borrowing at that level was not required
before 2005. The largest debt was $917 million in 1997, which was reduced to zero by the end of
FY2003. Congress increased the level of borrowing to pay claims in the aftermath of the 2005 hurricane
season (particularly Hurricanes Katrina, Rita, and Wilma). Congress increased the borrowing limit to
$18.5 bil ion in November 2005 and further increased the borrowing limit to $20.775 bil ion in March
2006. In July 2010, the borrowing limit was decreased to $20.725 bil ion. In 2013, following Hurricane
Sandy, Congress increased the borrowing limit to the current $30.425 bil ion.
Table 1. NFIP Borrowing FY1980 to FY1998
(nominal dol ars)
Fiscal Year
Amount Borrowed
Amount Repaid
Cumulative Debt
1980
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
1984
200,000,000
36,879,123
213,120,877
1985
0
213,120,877
0
1986
0
0
0
1987
0
0
0
1988
0
0
0
1989
0
0
0
1990
0
0
0
1991
0
0
0
1992
0
0
0
1993
0
0
0
1994
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
600,000,000
2001
600,000,000
345,000,000
600,000,000
2002
50,000,000
640,000,000
10,000,000
2003
0
10,000,000
0
2004
0
0
0
2005
300,000,000
75,000,000
225,000,000
2006
16,600,000,000
0
16,885,000,000
2007
650,000,000
0
17,735,000,000
2008
50,000,000
225,000,000
17,360,000,000
Congressional Research Service
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Fiscal Year
Amount Borrowed
Amount Repaid
Cumulative Debt
2009
1,987,988,421
347,988,421
19,000,000,000
2010
0
500,000,000
18,500,000,000
2011
0
750,000,000
17,750,000,000
2012
0
0
17,750,000,000
2013
6,250,000,000
0
24,000,000,000
2014
0
1,000,000,000
23,000,000,000
2015
0
0
23,000,000,000
2016
0
0
23,000,000,000
2017
7,425,000,000
0
30,425,000,000
2018
6,100,000,000
16,000,000,000Error!
20,525,000,000
Reference source not
found.
2019
0
0
20,525,000,000
2020
0
0
20,525,000,000
2021
0
0
20,525,000,000
Source: CRS analysis of data provided by FEMA Congressional Affairs, November 20, 2017. Data 1980-2017 provided by
FEMA Congressional Affairs, November 20, 2017. Data since 2017 from NFIP Watermark financial statements.
a. The $16 bil ion of debt was cancel ed rather than repaid (P.L. 115-72, Title III, §308).
In January 2017, the NFIP borrowed $1.6 bil ion for flood losses in 2016 and debt repayments. On
September 22, 2017, FEMA borrowed the remaining $5.825 bil ion from the Treasury, reaching the
NFIP’s authorized borrowing limit of $30.425 bil ion. On October 26, 2017, $16 bil ion of NFIP debt was
cancel ed to make it possible for the program to pay claims for Hurricanes Harvey, Irma, and Maria. This
represents the first time NFIP debt has been cancelled, although Congress appropriated funds between
1980 and 1985 to repay NFIP debt. FEMA borrowed another $6.1 bil ion on November 9, 2017, to fund
estimated 2017 losses, including those incurred by Hurricanes Harvey, Irma, and Maria, increasing the
debt to $20.525 bil ion.
The NFIP currently has $9.9 bil ion of remaining borrowing authority. As of September 8, 2021, the NFIP
had $7.5 bil ion available, with $5.2 bil ion in the National Flood Insurance Fund and $2.3 bil ion in the
reserve fund.
The NFIP transfers a portion of its risk to the private sector through the purchase of reinsurance and the
issuance of catastrophe bonds. The NFIP’s first large reinsurance purchase was in January 2017, when
FEMA purchased $1.042 bil ion of reinsurance, structured to pay 26% of losses between $4 bil ion and $8
bil ion arising from a single flooding event. Claims for Hurricane Harvey exceeded $10 bil ion, triggering
a full reinsurance claim. Since then, the NFIP has not claimed any reinsurance, as no storms have reached
the threshold of $4 bil ion in claims.
The NFIP could claim up to $2.9 bil ion in reinsurance in 2021. In order for the NFIP to claim on these
policies, losses for a single named storm would have to reach $4 bil ion for the 2021 traditional
reinsurance and $6 bil ion for each of the 2019, 2020, and 2021 catastrophe bonds.
Congressional Research Service
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Author Information
Diane P. Horn
Analyst in Flood Insurance and Emergency Management
Disclaimer
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