RFF Project

Reforming the National Flood Insurance Program

RFF researchers are examining the functioning of the National Flood Insurance Program, its role in promoting household and community resilience to flood events, and how the program can be reformed to better meet its objectives.

Flood insurance in the United States is primarily offered through the federal National Flood Insurance Program (NFIP), housed in the Federal Emergency Management Agency. The NFIP was founded in 1968. Communities voluntarily participate and then insurance is made available to residents. To date, almost all communities at risk of flooding have joined the program. After a slow start, participation has grown dramatically. As of December 2015 there were more than 5.1 million policies in force, representing $1.24 trillion in coverage.

Due to catastrophic flooding from Hurricane Katrina and Hurricane Sandy, the program is now more than $20 billion in debt to the US Treasury. It has been on the US Government Accountability Office’s High-Risk List since 2006 as a program in need of transformation. Congress passed reform legislation in 2013, but public backlash to policy price changes led to a reversal of some of the reforms in 2014. The program will be up for reauthorization again in the fall of 2017.

RFF researchers are examining the functioning of the NFIP, its role in promoting household and community resilience to flood events, and how the program can be reformed to better meet its objectives. In particular, RFF experts have investigated NFIP pricing, patterns of NFIP claims, premium affordability options, the design of community-based flood insurance policies, distributional impacts of the program, flood risk perceptions, drivers of the demand for flood insurance, and the relationship of insurance to disaster aid. Completed and ongoing projects are helping to inform issues of debate in advance of the NFIP reauthorization. Below are highlights of recent work.