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In 1968 Congress created the National Flood Insurance Program (NFIP) in response to the rising cost of taxpayer-funded disaster relief for flood victims and the increasing amount of damage caused by floods. The NFIP makes federally backed flood insurance available in communities that agree to adopt and enforce floodplain management ordinances to reduce future flood damage. The NFIP is self-supporting for the average historical loss
year. This means that unless there is a widespread disaster, operating expenses and flood insurance claims are financed through premiums collected.
A growing number of private insurers have begun offering “excess flood” policies, intended to provide more extensive water damage protection to homeowners than coverage provided by National Flood Insurance Policies alone. In addition, some insurers have introduced special policies for high value properties. These high-end policies may cover homes in noncoastal areas and/or provide enhancements to traditional flood coverage.
The 2004 Flood Insurance Reform Act addressed the issue of repetitive loss properties, which represented 1 percent of all properties insured but 25 to 30 percent of claims losses. The 2004 reforms provide for a pilot program to mitigate repetitive losses.
In 2005 the average amount of flood coverage was $176,545 and the average premium was $453.The average flood claim in the same year was $87,512, up from $39,094 in 2004. Loss payments totaled $13.1 billion in 2005, the highest on record, including losses from hurricanes Katrina, Rita and Wilma. Some 96 insurance companies participate in the "Write-Your-Own" Program, a program started in 1983 in which insurers issue policies and adjust flood claims on behalf of the federal government under their own names.
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Losses paid |
Year |
Policies in force
at end of year |
Number |
Amount
($000) |
| 1980 |
2,103,851 |
41,918 |
$230,414.3 |
| 1985 |
2,016,785 |
38,676 |
368,238.8 |
| 1990 |
2,477,861 |
14,766 |
167,919.6 |
| 1995 |
3,476,829 |
62,441 |
1,295,575.2 |
| 1996 |
3,693,076 |
52,675 |
828,040.3 |
| 1997 |
4,102,416 |
30,338 |
519,511.9 |
| 1998 |
4,235,138 |
57,340 |
886,026.0 |
| 1999 |
4,329,985 |
47,240 |
754,837.8 |
| 2000 |
4,369,087 |
16,358 |
251,551.7 |
| 2001 |
4,458,470 |
43,539 |
1,276,846.3 |
| 2002 |
4,519,799 |
25,261 |
433,198.8 |
| 2003 |
4,565,491 |
36,478 |
771,794.5 |
| 2004 |
4,667,446 |
54,745 |
2,140,197.7 |
| 2005 |
4,956,055 |
149,711 |
13,101,490.6 |
| Source: U.S. Department of Homeland Security, Federal Emergency Management Agency. |
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