The origins and development of the National Flood Insurance Program

We explore the emergence and development of federal flood insurance over time. After a couple of false starts in the 1950s, Congress passed the National Flood Insurance Act of 1968, which established the National Flood Insurance Program (NFIP). The NFIP sought to provide federally subsidized flood insurance in high-risk flood zones, with premium inflows intended to cover claims-payment outflows. While the NFIP struggled financially through the early 21st century, its fragile administrative structure was laid bare by Hurricanes Katrina and Rita. Beginning in 2005, claims payments drove the NFIP deeply into the red. After several years of politicking, Congress acted to reform the NFIP by reducing the subsidization of premiums and making the program more actuarially sound. But members backpedaled quickly after homeowners organized and threatened electoral sanctions – and the reforms were largely undone. We find that the polarization inherent in today’s party system makes coordinating on flood insurance reform difficult, as Democrats and Republicans advocate for different things. That said, members from districts/states that have been hit hard by flooding, regardless of party, tend toward maintaining federally subsidized premiums rather than promoting actuarial soundness.