The National Flood Insurance Program (NFIP) is a program created by the United States Congress in 1968 through the National Flood Insurance Act of 1968 (P.L. 90-448). This program enables property owners in participating communities to purchase insurance coverage, administered by the government, against losses from floods, and requires flood insurance for all loans or lines of credit secured by existing buildings, manufactured homes, or buildings under construction , residing in communities participating in NFIP.
The NFIP is designed to provide insurance alternatives for disaster relief to meet the increased cost of repairing damaged buildings and their contents caused by floods. In August 2017, the program insured about 5 million homes (down from about 5.5 million homes in April 2010), mostly in Texas and Florida. The cost of the insurance program was fully covered by the premium until the end of 2004, but had to continue borrowing funds since (mainly due to Hurricane Katrina and Hurricane Sandy), collecting $ 25 billion in debt in August 2017.
Video National Flood Insurance Program
Implementation
Participation in NFIP is based on an agreement between local communities and the federal government which states that if a community will adopt and enforce flood plain management governance to reduce future flood risk for new construction in the Special District Flood Disaster (SFHA), the federal government will make flood insurance is available in the community as a financial protection against flood losses. The SFHA and other premium risk zones applicable to each participating community are depicted on the Flood Insurance Rates (FIRMs). The Mitigation Division within the Federal Emergency Management Agency manages the NFIP and oversees flood management and maps the program components.
The objective is to reduce future flood damage through governance of community floodplain management and provide protection for property owners against potential losses through insurance mechanisms requiring premiums to be paid for protection. In 2003, GAO found that the loss-recurring properties of the program cost about $ 200 million per year. Congress originally intended that operating costs and flood insurance claims paid through premiums collected for flood insurance policies. NFIP borrows from the US Treasury for those times when the losses are heavy, and these loans are repaid with interest.
Between 1978 and the end of 2014, the US Federal Government has paid more than $ 51 billion in claims under the National Flood Insurance Program.
Maps National Flood Insurance Program
Amendments
The program was first modified by the Flood Protection Act of 1973, which made the purchase of compulsory flood insurance for property protection within SFHAs. In 1982, the Act was amended by the Coastal Banning Resources Act (CBRA). The CBRA enacted a set of maps depicting the Coastal Barrier System of John H. Chafee Coastal (CBRS) where federal flood insurance is not available for new structures or significantly increased. The 1994 National Flood Reform Reform Act codified the Community Assessment System (an incentive program that encourages communities to exceed minimum federal requirements for floodplain development) within the NFIP. The program was further amended by the 2004 Flood Insurance Reform Act, with the aim of reducing "property losses on which repeated claims for flood insurance claims have been made."
Biggert-Waters Insurance Reform Act of 2012 (Biggert-Waters) modifies NFIP. At the end of 2011, when Congress passed Biggert-Waters, NFIP's cumulative debt stood at more than $ 17 billion. The main principle of Biggert-Waters is to convert NFIP premiums to conform to actuarial risk-based premiums that reflect better expected losses and actual flood risk. These changes include removing discounts for many of the policies sold under actual actuarial risk targets and eliminating "grandfathering" from longer rates.
In January 2014, the United States Senate passed the Property Owners Life Insurance Act 2014. The bill changed the process used to change subsidized premiums and restore lower-level grandfathering; effectively delaying the increase in flood insurance premiums to earn risk-based premiums under Biggert-Waters and redistribute premium costs lost on all remaining policyholders.
The National Flood Insurance program is $ 24 billion in debt in early 2014 as a result of Hurricanes Katrina, Rita and Sandy. The section of the HFIAA described above has taken note of insurance and environmental observers that delay in the implementation of the actuarial rate will cause taxpayers to be exposed to additional losses.
Determination of Floodplain Status of Appeal and Changes
Map Amendment Letter
Inadequate topographic detail or accuracy can result in unwarranted Specific Flood Area Determination (SFHA). Application for Letter of Map Amendment (LOMA) using Elevation Certificate (prepared by Registered Land Surveyor or Registered Professional Engineer) to request FEMA remove the flood insurance requirement on the individual property.
Map Revision Letter
For some wider properties or areas, applications for Map Revision Letter may be filed when landscape topography is different from that shown on the floodplain boundary and/or flood elevation shown in the FIRM and Flood Insurance Study. A Fill Based Revision Map (LOMR-F) is used when landscape topography is altered by humans, usually to improve soil elevation and remove soil from floodplains. The Map Revised Letter (CLOMR) and the Conditional Letters of Map Based Contents (CLOMR-F) are strongly recommended as a mechanism for obtaining FEMA feedback on projects prior to site changes being made, especially given the increased interest in the nexus between NFIP and the Endahered Species Act.
Criticism
Prior to 1950, flood insurance was part of a standard homeowners insurance policy. During the 1950s, an increasingly high correlation of losses by flood policy holders of the same company caused many insurance companies to start excluding flood coverage from standard insurance policies, selling flood insurance separately. Over time, insurance premiums collected are insufficient in paying payments after major flood events. In 1968, the National Flood Insurance Act established the National Flood Insurance Program (NFIP), which allowed property owners to purchase insurance from the US government that bears certain losses from flooding. This insurance is not determined by market risk assessment. This is cheaper than private insurance rates. This is achieved either by programs that run deficits and borrow money or with subsidies from national governments. Either way, property owners with NFIP policies accept government subsidies to live in areas with high flood risk.
Property losses arising from flood damage are largely the responsibility of the property owner, although the consequences are sometimes reduced through provisions for disaster relief. Today, property owners in floodplains often receive disaster relief and payments for insured losses, which in many cases negate the original intent of NFIP. As a result, these policy decisions have increased losses from floods in recent years, both in terms of property and life.
Additionally, certain provisions in NFIP increase the likelihood that flood-prone properties will be occupied by those who are least likely to be in a position to recover from the flood disaster, which further increases the demand for assistance. This is an example of reverse selection. Some of the factors contributing to an increase in help requests are:
- Flood insurance for property in flood-prone areas is mandatory only to get a loan, which makes it somewhat more likely that flood-prone properties will be owned by seniors who have paid off their mortgages, or investors who have acquired property for rental income.
- Flood insurance only covers losses to property owners, and claims will be subject to cover, which further increases the likelihood that the property will be occupied by the lessee rather than the property owner.
- Flood-prone properties are more likely to be offered for rent due to an increased risk and/or owner-related costs occupying the property itself.
- Flood-prone properties are more likely to be offered for rent at a discount, which attracts low-income groups, the elderly, and the weaker.
According to critics of the program, the government's subsidized insurance plan "encourages development, and rebuilding, in vulnerable coastal areas and floodplains." Stephen Ellis, of the group of Taxpayers for Common Sense, points to "property that flooded 17 or 18 times that is still covered by the federal insurance program" without rising premiums.
Another criticism is that FEMA does not manage all policies, instead of outsourcing many policies to private insurance companies. When a disaster occurs, FEMA makes payments to private insurance companies to offset their costs. However, there is little oversight and some rules on how money should be distributed. As a result, private insurance companies have been known to use FEMA payments to hire lawyers who are fighting policyholders in court. One law firm is estimated to have received US $ 29 million from FEMA payments to counter Hurricane Sandy's claims.
References
External links
- http://www.floodsmart.gov
- Federal law authorizing NFIP
- Experts: The MSNBC public misleading term flood
Source of the article : Wikipedia
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