National Flood Insurance Program: Background, Challenges, and Financial Status [March 4, 2011] [open pdf - 276KB]
"In 1968, the U.S. Congress established the National Flood Insurance Program (NFIP) to address the nation's flood exposure and challenges inherent in financing and managing flood risks in the private sector. Private insurance companies at the time claimed that the flood peril was uninsurable and, therefore, could not be underwritten in the private insurance market. [...] The 111th Congress enacted legislation to ensure that basic NFIP authorities remain in force while the debate continued on reform proposals. Legislation to reform and reauthorize the NFIP failed to pass the Senate in 2010, leaving the program with a temporary extension that will expire on September 30, 2011. Although the Federal Emergency Management Agency (FEMA) is now able to issue new policies, renew policies, increase coverage amounts, and pay claims, concerns remain that this latest extension, and the possibility of yet another lapse in authority after September 30, 2011, could result in uncertainty among lenders, borrowers, and policyholders. In the 112th Congress, one unintended consequence of efforts to reform the NFIP involves FEMA's ongoing update of its flood hazard risk assessment processes--FEMA's Map Modernization (Map Mod) program--and its public awareness and education initiatives. As newly revised Flood Insurance Rate Maps (FIRMs) become effective in NFIP-participating communities across the country, many property owners not previously required to be covered under a flood insurance policy are learning about new flood risk data currently being produced and disseminated by FEMA. FEMA is informing homeowners that their properties have been remapped into a special flood hazard area (SFHA) and, therefore, they are subject to the NFIP's mandatory flood insurance purchase requirement. On January 25, 2011, Representative Candice S. Miller introduced H.R. 435, the National Flood Insurance Program Termination Act of 2010, to terminate the NFIP and related mandatory purchase and compliance requirements. The bill would authorize interstate compacts to allow states to enter into agreements or compacts to make available to interested persons flood insurance coverage."
CRS Report for Congress, R40650