should the flood insurance program continue?

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The National Flood Insurance Program

Overview

The National Flood Insurance Program (NFIP) is a federal government program managed by the

Federal Emergency Management Agency (FEMA).

The NFIP is not a disaster assistance program. It is not a loan to be repaid. It offers federally-

backed flood insurance to homeowners, business owners, and renters in participating

communities.

The goal is to reduce the socio-economic impact of disasters.

The National Flood Insurance Program aims to reduce the impact of flooding on private and

public structures. It does so by providing affordable insurance to property owners, renters and

businesses and by encouraging communities to adopt and enforce floodplain management

regulations.

(NFIP, FEMA)

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National Flood Insurance Program Framework

Insurance purchased through a licensed private

agent

Contract terms and rates set by FEMA

Participating Communities Must Do Both

Sets requirements for participants

Pays claims and expenses

Bears financial risk

FEMA

NFIP

Insurance

Write Your Own (WYO)

participating company

Direct Servicing Agent

Floodplain Managment

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Who can buy insurance?

Anyone living in a participating community.

• the community agrees to adopt and enforce floodplain management ordinances

• properties are mapped into risk levels on Flood Insurance Rate Maps (FIRMS)

• premiums vary by risk level

If a property is in an area of moderate to low risk, insurance is optional.

Who must buy insurance?

If a property is in a high-risk area, insurance is required if

• Have loans from a federally regulated or insured lender

o Mortgage

o Small Business Administration Disaster Loan (business, nonprofit, homeowner, renter)

• Receive Federal disaster assistance (grant or loan) for flood-damage

o Must purchase and maintain flood insurance as long as property exists (owner)

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Who sells insurance policies?

Individual insurance policies are sold by licensed insurance agents. The terms of all policies are set

by FEMA.

Direct Servicing Agent

• Insurance agent or broker

• NFIP Direct System (cloud-based management system) administers policies

Write Your Own (WYO) Program Participant

• ‘cooperative’ undertaking between private insurance companies and FEMA

• write and service the Standard Flood Insurance Policy ‘in their own names’

How are costs divided between private insurers and the federal government?

Direct servicing agents earn a commission on policies.

WYO participants have expense allowance to cover costs of writing policies and processing claims.

Federal government is responsible for underwriting losses.

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Sources

National Flood Insurance Program (NFIP). (2018) Benefits.gov. Retrieved from https://www.benefits.gov/benefits/benefit-details/435

National Flood Insurance Program. (2018). Federal Emergency Management Agency. Retrieved from

https://www.fema.gov/national-flood-insurance-program