National Flood Insurance Program Borrowing Authority

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. On February 10, 2025, the NFIP borrowed $2 billion to pay NFIP claims. The debt is now $22.525 billion, with $7.9 billion of remaining borrowing authority.

NFIP Funding

Funding for the NFIP is primarily maintained in an authorized account called 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 Treasury when the NFIF's balance has been insufficient to pay the NFIP's obligations (e.g., insurance claims). Since the end of FY2017, 35 short-term NFIP reauthorizations have been enacted. The current reauthorization is set to expire on September 30, 2026. These extensions did not increase the NFIP's borrowing limit or provide additional funds to the NFIP.

As of September 18, 2025, the NFIP had $601 million in the NFIF and $1.141 billion in the Reserve Fund to pay claims. As of December 31, 2025, the NFIP had paid claims totaling $19.069 million in FY2026.

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 allows the program to borrow money from Treasury for such events. For most of the NFIP's history, the program has been able to cover its costs, borrowing relatively small amounts from 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 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 billion and has paid $6.17 billion in interest. According to FEMA, the program has been paying about $619 million in interest annually, accruing $1.7 million in interest daily.

Table 1 shows NFIP borrowing, repayments, and debt from FY1980 to FY2026. Comparable figures are not available before 1980. When the NFIP was established, the borrowing limit was $250 million. In 1973, the borrowing limit was increased to $500 million, or $1 billion with Presidential approval. The borrowing limit was increased to $1.5 billion 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 billion in November 2005 and further increased the borrowing limit to $20.775 billion in March 2006. In July 2010, the borrowing limit was decreased to $20.725 billion. In 2013, following Hurricane Sandy, Congress increased the borrowing limit to the current $30.425 billion.

In January 2017, the NFIP borrowed $1.6 billion for flood losses and debt repayments. On September 22, 2017, FEMA borrowed the remaining $5.825 billion from Treasury, reaching the NFIP's authorized borrowing limit of $30.425 billion. On October 26, 2017, $16 billion of NFIP debt was cancelled 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 billion on November 9, 2017, to pay claims for losses incurred in Hurricanes Harvey, Irma, and Maria, increasing the debt to $20.525 billion. The NFIP did not need to borrow between November 2017 and February 2025. The last time NFIP borrowed $2 billion was on February 10, 2025.

The NFIP has transferred 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 2017, when FEMA purchased $1.042 billion of reinsurance. Claims for Hurricane Harvey exceeded $9 billion, triggering a full reinsurance claim.

The NFIP could potentially have claimed $757.8 million in reinsurance for flooding in 2025, but no storm caused sufficient damage to reach the threshold of $7 billion to trigger a claim. The NFIP did not issue a catastrophe bond in 2025, and no information is available on 2026 NFIP reinsurance purchases.