An Overview: The National Flood Insurance Program

Founded in 1968 as a way of protecting home and business owners who live in flood-prone communities, the National Flood Insurance Program (NFIP) has served as an important protection that millions of Americans have relied on in the wake of significant natural disasters.[1] [2]

The majority of homes covered under this insurance program are located in Florida and Texas, especially along the Gulf of Mexico, however a significant portion of the properties are located in Maryland. [3] [4] [5]

While this government-administered program has been running well for decades, massive insurance claims from Hurricanes Katrina and Sandy, along with other natural disasters, have driven up debt in these programs. This has led to the insurance program raising premiums, which has forced many insurance holders to drop out of the program. Although flood insurance for those living in high-risk flood areas is a federal mandate, it is only applicable to mortgages from federally regulated lenders and even those who are mandated to buy insurance do not comply.

Quick Facts (October 2018):[6] [7] [8]

Why does this affect Maryland?[9]

Maryland has over 177,433 extreme, very high and high storm surge risk-rated single-family homes (2018 numbers).

While not facing the number of storms as Florida, Maryland has still suffered from Hurricanes Ivan, Irene and Sandy.

More Marylanders are living in flood-prone areas than before and the number of areas that are at risk of flooding has increased.

Legislative history and reform

Attempts have been made to reform the insurance program, most notably the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2013. The former sought to remove many of the discounted rates the original insurance premiums were being sold for, and the latter delayed the premiums from rising because of public pressure against increased premiums.[10] [11]

The future

When the Biggert-Waters reform expired in September 2017, Congress went through a number of reauthorization and funding battles, which pushed the current (now tenth) reauthorization of this program to continue until September 30, 2019. If we hit this date without a reauthorization, the program will not be able to provide new contracts, current insurance policies would expire at the end of the one year policy term and the borrowing authority from the program would be reduced to $1 billion, effectively ending the program.[12] [13]

The White House is considering creating a new risk rating plan that would allow the program to use actuarial risk-adjusted premiums, however it is likely to face similar opposition that the 2012 Congressional reform sought to do. The president is not necessarily accountable to the people the same way Congress is, however Florida is a swing-state in presidential races and could derail reform.[14]

This problem needs to be solved fast because as climate change creates more extreme weather scenarios we will see worse damage and destruction and therefore more costly insurance payouts.[15]

How can we fix the program? [16]

Treat NFIP like a regular insurance program:

What can you do?

Talk to your representative and tell them that the NFIP must be reauthorized and that meaningful reform be met so that homeowners can afford this necessary insurance and the government does not sink money into a non-efficient insurance program.

















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