National Flood Insurance Program Major Changes Needed If It Is To Operate Without A Federal Subsidy

National Flood Insurance Program: Major Changes Needed if It Is To Operate Without a Federal Subsidy

The National Flood Insurance Program (NFIP) is housed within the Federal Emergency Management Agency (FEMA) and offers insurance policies that are marketed and sold through private insurers, but with the risks borne by the U.S. federal government. NFIP's primary goals are to ensure affordable insurance premiums, secure widespread community participation in the program, and earn premium and fee income that covers claims paid and program expenses over time. In July 2012, the U.S. Congress passed the Biggert-Waters Flood Insurance Reform and Modernization Act (Biggert-Waters 2012), designed to move toward an insurance program with NFIP risk-based premiums that better reflected expected losses from floods at insured properties. This eliminated policies priced at what the NFIP called "pre-FIRM subsidized" and "grandfathered." As Biggert-Waters 2012 went into effect, constituents from multiple communities expressed concerns about the elimination of lower rate classes, arguing that it created a financial burden on policy holders. In response to these concerns Congress passed The Homeowner Flood Insurance Affordability Act of 2014 (HFIAA 2014). The 2014 legislation changed the process by which pre-FIRM subsidized premiums for primary residences would be removed and reinstated grandfathering. As part of that legislation, FEMA must report back to Congress with a draft affordability framework. Affordability of National Flood Insurance Program Premiums: Report 1 is the first part of a two-part study to provide input as FEMA prepares their draft affordability framework. This report discusses the underlying definitions and methods for an affordability framework and the affordability concept and applications. Affordability of National Flood Insurance Program Premiums gives an overview of the demand for insurance and the history of the NFIP premium setting. The report then describes alternatives for determining when the premium increases resulting from Biggert-Waters 2012 would make flood insurance unaffordable.

When Congress authorized the National Flood Insurance Program (NFIP) in 1968, it intended for the program to encourage community initiatives in flood risk management, charge insurance premiums consistent with actuarial pricing principles, and encourage the purchase of flood insurance by owners of flood prone properties, in part, by offering affordable premiums. The NFIP has been reauthorized many times since 1968, most recently with the Biggert-Waters Flood Insurance Reform Act of 2012 (BW 2012). In this most recent reauthorization, Congress placed a particular emphasis on setting flood insurance premiums following actuarial pricing principles, which was motivated by a desire to ensure future revenues were adequate to pay claims and administrative expenses. BW 2012 was designed to move the NFIP towards risk-based premiums for all flood insurance policies. The result was to be increased premiums for some policyholders that had been paying less than NFIP risk-based premiums and to possibly increase premiums for all policyholders. Recognition of this possibility and concern for the affordability of flood insurance is reflected in sections of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA 2014). These sections called on FEMA to propose a draft affordability framework for the NFIP after completing an analysis of the efforts of possible programs for offering "means-tested assistance" to policyholders for whom higher rates may not be affordable. BW 2012 and HFIAA 2014 mandated that FEMA conduct a study, in cooperation with the National Academies of Sciences, Engineering, and Medicine, which would compare the costs of a program of risk-based rates and means-tested assistance to the current system of subsidized flood insurance rates and federally funded disaster relief for people without coverage. Production of two reports was agreed upon to fulfill this mandate. This second report proposes alternative approaches for a national evaluation of affordability program policy options and includes lessons for the design of a national study from a proof-of-concept pilot study.

Alluvial fans are gently sloping, fan-shaped landforms common at the base of mountain ranges in arid and semiarid regions such as the American West. Floods on alluvial fans, although characterized by relatively shallow depths, strike with little if any warning, can travel at extremely high velocities, and can carry a tremendous amount of sediment and debris. Such flooding presents unique problems to federal and state planners in terms of quantifying flood hazards, predicting the magnitude at which those hazards can be expected at a particular location, and devising reliable mitigation strategies. Alluvial Fan Flooding attempts to improve our capability to determine whether areas are subject to alluvial fan flooding and provides a practical perspective on how to make such a determination. The book presents criteria for determining whether an area is subject to flooding and provides examples of applying the definition and criteria to real situations in Arizona, California, New Mexico, Utah, and elsewhere. The volume also contains recommendations for the Federal Emergency Management Agency, which is primarily responsible for floodplain mapping, and for state and local decisionmakers involved in flood hazard reduction.

This article analyzes the ongoing debate over amendments to the National Flood Insurance Program (NFIP) in the broader context of adaptation to climate change. In the fifty years since its enactment, the NFIP has proven to be a financial and environmental disaster. The availability of flood insurance through the NFIP has encouraged an unprecedented population surge along the coasts, and, as this population has become increasingly vulnerable to hurricane activity and flooding from sea level rise, the federal government has paid billions in insurance claims and disaster relief. Moreover, the increased coastal population has jeopardized the ability of coastal ecosystems to adapt to rising sea levels, putting both humans and the natural environment at risk. The Biggert-Waters Flood Insurance Reform Act of 2012 was intended to correct some of the these problems in the NFIP by eliminating subsidized premium rates and updating insurance rates to more accurately reflect risk. Those amendments, however, have been met with bitter opposition from those now facing increased premium rates for flood insurance. Several recent pieces of legislation have called for significant delays in the rate increases. Much of the opposition to the NFIP amendments can be traced to a broader resistance to lifestyle changes that may be required by a changing climate. Adaptation to climate change is still in its infancy in the United States, and has not yet had an impact on the lifestyles of most individuals, including lifestyles made possible by substantial government subsidies for everything from flood insurance to roads to water. But as certain land use patterns and other behaviors become increasingly unsustainable, the elimination of subsidies that encourage environmentally harmful behaviors is likely to become an appealing first step toward adaptation. The elimination of those subsidies will work tremendous changes on communities that have relied upon them for decades, as is currently happening in coastal communities reliant on flood insurance. Consequently, prior to their elimination, it is important to understand whether the provision of subsidies in the past creates any future obligation on the part of the government to those people who have built their lives around subsidies. After considering several different legal frameworks through which such legal obligations might be imposed, my article concludes that the government is under no obligation to continue its subsidies of environmentally harmful behaviors. Despite the controversy and reluctance likely to accompany any measures that force changes in lifestyle, these are the kinds of changes that adaptation will require.

Catalog of reports, decisions and opinions, testimonies and speeches.