National Flood Insurance Program

"NFIP" redirects here. For the National Foundation for Infantile Paralysis, see March of Dimes.

The National Flood Insurance Program (NFIP) is a program created by the Congress of the United States in 1968 through the National Flood Insurance Act of 1968 (P.L. 90-448). The NFIP has two purposes: to share the risk of flood losses through flood insurance and to reduce flood damages by restricting floodplain development. The program enables property owners in participating communities to purchase insurance protection, administered by the government, against losses from flooding, and requires flood insurance for all loans or lines of credit that are secured by existing buildings, manufactured homes, or buildings under construction, that are located in the Special Flood Hazard Area in a community that participates in the NFIP. U.S. Congress limits the availability of National Flood Insurance to communities that adopt adequate land use and control measures with effective enforcement provisions to reduce flood damages by restricting development in areas exposed to flooding.

Flood insurance was generally provided by private insurers beginning in 1895, but after the Great Mississippi Flood of 1927, most private insurers concluded that flood risk was uninsurable at a price that consumers could afford given the catastrophic nature of flooding, as well as difficulties in creating accurate risk assessments for policy pricing and risks of adverse selection.[1]

The NFIP is managed and administered by the Federal Emergency Management Agency (FEMA) through the Federal Insurance and Mitigation Administration (FIMA).[2] The program is designed to provide an insurance alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by floods.[3] As of August 2017, the program insured about 5 million homes (down from about 5.5 million homes in April 2010), the majority of which are in Texas and Florida.[4][5] The cost of the insurance program was fully covered by its premiums until the end of 2004, but it has had to steadily borrow funds since, primarily due to Hurricane Katrina and Hurricane Sandy, accumulating $25 billion of debt by August 2017.[4][6] In October 2017, Congress cancelled $16 billion of NFIP debt, making it possible for the program to pay claims. The NFIP owes $20.525 billion to the U.S. as of December 2020.[7]

  1. ^ Horn & Webel 2023, p. 10.
  2. ^ "Introduction to the National Flood Insurance Program (NFIP)" (PDF). fas.org. November 19, 2021. p. 1. Retrieved 4 February 2022. The NFIP is managed by the Federal Emergency Management Agency (FEMA), through its subcomponent the Federal Insurance and Mitigation Administration (FIMA).
  3. ^ Federal Emergency Management Agency (March 1986). "A Unified National Program for Floodplain Management" (PDF). Retrieved 2014-11-08.
  4. ^ a b Witkowski, Rachel; Scism, Leslie (2017-08-26). "Hurricane Harvey Threatens Largest Flood Insurer: The Government". Wall Street Journal. Retrieved 2017-10-28.
  5. ^ Holladay JS, Schwartz JA. (2010). Flooding the Market: The Distributional Consequences of the NFIP. Institute for Policy Integrity.
  6. ^ "How government policy exacerbates hurricanes like Harvey". The Economist. 2 September 2017. Retrieved 2017-09-06.
  7. ^ "National Flood Insurance Program Borrowing Authority" (PDF). fas.org. Federation of American Scientists. p. 3. Retrieved 2 February 2022.