Key Issues > National Flood Insurance Program - High Risk Issue

National Flood Insurance Program - High Risk Issue

The National Flood Insurance Program (NFIP) is a key component of the federal government’s effort to limit the damage and financial impact of floods, but it has not generated sufficient revenues to pay claims. Insuring property that is vulnerable to natural disasters exposes the federal government to financial risks.

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The National Flood Insurance Program (NFIP) has been on GAO’s High Risk List since 2006. As of August 2016, the NFIP owed $23 billion in borrowed funds to the Department of Treasury and is unlikely to generate sufficient revenues to repay these funds. This lack of sufficient revenue highlights what have been structural weaknesses in how the program is funded.

The Biggert-Waters Flood Insurance Reform Act of 2012 contained provisions to help strengthen the financial solvency of the program, including phasing out some discounted insurance premiums. However, in 2014 the Homeowner Flood Insurance Affordability Act of 2014 was enacted, which reinstated some premium subsidies and slowed down some premium rate increases from the Biggert-Waters Act.

GAO has made a number of recommendations for the program aimed at improving

financial controls,
oversight of contractors,
and the Federal Emergency Management Agency’s management of NFIP.

For more on GAO's reports and recommendations, see the key reports tab above.

Looking for our recommendations? Click on any report to find each associated recommendation and its current implementation status.

Flood Insurance: Potential Barriers Cited to Increased Use of Private Insurance

GAO-16-611: Published: Jul 14, 2016. Publicly Released: Jul 14, 2016.

Lenders and their regulators have taken some action to implement provisions on private flood insurance in the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act). Specifically, lenders told GAO they send notifications to borrowers that encourage borrowers to compare private and National Flood Insurance Program (NFIP) policies. Lenders with whom GAO spoke accepted private policie...

National Flood Insurance Program: Continued Progress Needed to Fully Address Prior GAO Recommendations on Rate-Setting Methods

GAO-16-59: Published: Mar 17, 2016. Publicly Released: Apr 18, 2016.

The Federal Emergency Management Agency (FEMA) sets National Flood Insurance Program (NFIP) full-risk rates using a model that includes some characteristics of catastrophe models used by private insurers. In particular, both models assess flood probability and damage to estimate potential flood losses. Like private insurers, NFIP also uses variables specific to each structure in estimating the deg...

National Flood Insurance Program: Options for Providing Affordability Assistance

GAO-16-190: Published: Feb 10, 2016. Publicly Released: Mar 10, 2016.

Options for targeting assistance to subsidized policyholders of primary residences who may experience difficulty paying full-risk rates for their National Flood Insurance Program (NFIP) policies include means testing assistance based on the income level of policyholders or geographic areas, setting premium caps, and basing assistance on the cost of mitigating the risk of damage to their homes. Cur...

Overview of GAO's Past Work on the National Flood Insurance Program

GAO-14-297R: Published: Apr 9, 2014. Publicly Released: May 9, 2014.

Over the past 11 years, GAO has identified a variety of challenges facing the National Flood Insurance Program (NFIP) and has made numerous recommendations to the Federal Emergency Management Agency (FEMA) to improve its administration of the program. FEMA has generally agreed with GAO's recommendations and has taken steps to address them. However, FEMA has not fully addressed all of the issues we...

FEMA: Action Needed to Improve Administration of the National Flood Insurance Program

GAO-11-297: Published: Jun 9, 2011. Publicly Released: Jun 9, 2011.

The National Flood Insurance Program (NFIP) has been on GAO's high-risk list since March 2006 because of concerns about its long-term financial solvency and related operational issues. Significant management challenges also affect the Federal Emergency Management Agency's (FEMA) ability to administer NFIP. This report examines (1) the extent to which FEMA's management practices affect the administ...