Expert Report

Affordability of National Flood Insurance Program Premiums: Report 1 (2015)

Each report is produced by a committee of experts selected by the Academy to address a particular statement of task and is subject to a rigorous, independent peer review; while the reports represent views of the committee, they also are endorsed by the Academy. Learn more on our expert consensus reports.

Established in 1968, the National Flood Insurance Program is administered by the Federal Emergency Management Agency (FEMA) and offers flood insurance policies to property owners. As part of efforts to keep premiums low, nearly 20 percent of the 5.5 million National Flood Insurance Program policies nationwide pay subsidized premiums. In the catastrophic loss year of 2005, following Hurricane Katrina and subsequent storms, the program was driven into debt after borrowing billions of dollars from the Treasury to pay claims on these policies.

The Biggert-Waters act of 2012 was designed to move the National Flood Insurance Program toward risk-based premiums that better reflect expected losses from floods at insured properties. Because this would have caused premium increases for many policy holders, the legislation also asked FEMA to develop an affordability framework to guide the design of a targeted assistance program to help individuals afford risk-based premiums.

This report provides input to FEMA's affordability framework, explaining the decisions that must be made when designing an assistance program, and describing alternative ways premiums might be made more affordable.

A webinar was held on Wednesday, April 8 at 1 p.m. EST, featuring a presentation and Q&A session with committee chair Leonard A. Shabman of Resources for the Future and committee members Allen Schirm of Mathematica Policy Research and John Boland of Johns Hopkins University, Baltimore. View the archived video online here, and download a PDF of the presentation here.