What is the National Flood Insurance Program (NFIP)?
The NFIP is a Federal program created by Congress to mitigate future flood losses nationwide through sound, community-enforced building and zoning ordinances and to provide access to affordable, federally backed flood insurance protection for property owners. The NFIP is designed to provide an insurance alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by floods. Participation in the NFIP is based on an agreement between local communities and the Federal Government which states that if a community will adopt and enforce a floodplain management ordinance to reduce future flood risks to new construction in Special Flood Hazard Areas (SFHAs), the Federal Government will make flood insurance available within the community as a financial protection against flood losses.
Why was the NFIP established by Congress?
For decades, the national response to flood disasters was generally limited to constructing flood-control works such as dams, levees, seawalls and the like, and providing disaster relief to flood victims. This approach, however, did not reduce losses, nor did it discourage unwise development. In some instances, it may have encouraged additional development. To compound the problem, due to its high risk and seasonal nature, insurance companies were not able to provide affordable flood insurance coverage. Considering mounting flood losses and escalating costs of disaster relief to the taxpayers, the U.S. Congress created the NFIP. The intent was to reduce future flood damage through community floodplain management ordinances and provide protection for property owners against potential losses through an insurance mechanism that requires a premium to be paid for the protection.
How was the NFIP established and who administers it?
The U.S. Congress established the NFIP on August 1, 1968, with the passage of the National Flood Insurance Act of 1968. The NFIP was broadened and modified with the passage of the Flood Disaster Protection Act of 1973 and other legislative measures. It was further modified by the National Flood Insurance Reform Act of 1994 and the Flood Insurance Reform Act of 2004. The NFIP is administered by the Federal Emergency Management Agency (FEMA), a component of the U.S. Department of Homeland Security.
How does the NFIP benefit property owners? Communities?
Through the NFIP, property owners in participating communities are able to insure against flood losses. By employing wise floodplain management, a participating community can reduce risk and protect its citizens and the community against much of the devastating financial losses resulting from flood disasters. Careful local management of development in the floodplains results in construction practices that can reduce flood losses and the high costs associated with flood disasters to all levels of government.
What is the definition of a community?
A community, as defined for the NFIP’s purposes, is any state, area, or political subdivision; any Indian tribe, authorized tribal organization, or Alaskan native village; or authorized native organization that has the authority to adopt and enforce floodplain management ordinances for the area under its jurisdiction. In most cases, a community is an incorporated city, town, township, borough, or village, or an unincorporated area of a county or parish. However, some states have statutory authorities that vary from this description.
Is community participation mandatory?
Community participation in the NFIP is voluntary (although some states require NFIP participation as part of their floodplain management program). Each identified flood-prone community must assess its flood hazard and determine whether flood insurance and floodplain management would benefit the community’s residents and economy. However, a community that chooses not to participate within one year after the flood hazard has been identified (and which has been provided an NFIP floodplain map by FEMA) is subject to the ramifications (see: "penalties," et al, below). A community’s participation status can significantly affect current and future owners of property located in SFHAs.
What is the NFIP’s Regular Program?
A community participating in the Regular Program of the NFIP is usually provided with a Flood Insurance Rate Map (FIRM) and a detailed engineering study, termed a Flood Insurance Study (FIS). Under the Regular Program, the adoption by the community of more comprehensive floodplain requirements is required for higher amounts of flood insurance.
What happens when a participating community chooses not to adopt the effective FIRM and compliant floodplain management ordinance?
As part of their agreement to participate in the NFIP, communities adopt and enforce these ordinances, including FIRMs. If communities do not, they can be placed on probation or suspended from the program. This is done only after FEMA has provided assistance to the community to help it become compliant.
What is probation?
Probation is a FEMA-imposed change in a community’s status resulting from violations and deficiencies in the administration and enforcement of NFIP local floodplain management regulations.
When can a community be placed on probation?
A community can be placed on probation 90 days after FEMA provides written notice to community officials of specific deficiencies. Probation generally is imposed only after FEMA has consulted with the community and has not been able to resolve deficiencies.
How long will probation last?
Probation may be continued for up to one year after the community corrects all program deficiencies and remedies all violations to the maximum extent possible.
What penalties are imposed when a community is placed on probation?
A surcharge is added to the premium for each policy sold or renewed in the community. The surcharge is effective for at least one year after the community’s probation period begins. The surcharge is intended to focus the attention of policyholders on the community’s noncompliance to help avoid suspension of the community, which has serious adverse impacts on those policyholders. Probation does not affect the availability of flood insurance.
What is suspension?
Suspension of a participating community occurs when the community fails to adopt an adequate ordinance, including adopting the most current FIRMs. The community is provided written notice of the impending suspension and granted 30 days in which to show cause why it should not be suspended. Suspension is imposed by FEMA. If suspended, the community becomes non-participating and flood insurance policies cannot be written or renewed. Policies in force at the time of suspension, however, continue in force for the policy term. FEMA may suspend a participating community when the community fails to enforce its floodplain management regulations for failure to adopt compliant floodplain management measures, or if it repeals or amends previously compliant floodplain management measures. New flood insurance coverage cannot be purchased, and policies cannot be renewed in a suspended community. Policies in force at the time of suspension continue in force for the policy term. If the community is suspended following a period of probation, the community is provided written notice of the impending suspension and granted 30 days in which to show cause why it should not be suspended.