In the meantime, 30 Senate co-sponsors, mostly from coastal states, are backing the "Homeowner Flood Insurance Affordability Act" (S. 1846), (introduced by Sens. Robert Menendez (D-N.J.) and Johnny Isakson (R-Ga.)). That bill would delay for four years the implementation of certain provisions of the 2012 Flood Insurance Reform Act, including rate increases intended to help the NFIP become financially solvent by bringing rates more in line with actual flooding risks. The Homeowner Flood Insurance Affordability Act may see formal Senate consideration as early as this month.
The following overview and related references are provided for background on the NFIP, its history of financial insolvency, and the most recent (2012) substantive attempt to reform the program.
National Flood Insurance Program
Established in 1968 through the National Flood Insurance Act of 1968 (P.L. 90-448), the NFIP
Federal Emergency Management Agency (FEMA) for two major objectives: first, to pool risk and help guarantee flood insurance availability; and second, to encourage the development of local floodplain management regulations and building standards that reduce flood risks, damages and costs. Property owners in communities that have adopted FEMA’s Flood Insurance Rate Maps (known as “FIRMs”) become eligible for NFIP flood insurance policies. The maximum coverage for single- and multi-family dwellings is $250,000. Commercial property owners can purchase policies covering up to $500,000 in losses. Owners of residential properties within designated flood risk areas with federally-backed mortgages are required to purchase NFIP policies.
Had that phase-out occurred as intended, the NFIP should have ultimately reduced the federal government’s responsibility for flood losses. However, rate subsidies have remained in place, and the NFIP has become financially insolvent while failing to meet the original 1968 Act objectives (noted above). (When it cannot fulfill its claim responsibilities, the FEMA borrows money from the U.S. Treasury to pay its NFIP claims.)
- King, Rawle O. February 2013. “The National Flood Insurance Program: Status and Remaining Issues for Congress.” Congressional Research Service Report No. R428450. The report identifies and presents some key flood management issues for congressional consideration, and concludes with a discussion of policy options for the future financial management of flood hazards.
- AECOM, 2013 (for the Federal Emergency Management Agency). “The Impact of Climate Changeand Population Growth on the National Flood Insurance Program.” The report in part evaluates the likely impact of climate change and population growth on the National Flood Insurance Program.
- FEMA. September 24, 2013. “Community Rating System (CRS) and Their Classes.” Provides an overview of the voluntary Community Rating System program for National Flood Insurance Program-participating communities.