Affordability of National Flood Insurance Program Premiums—Report 1

The Biggert-Waters Act of 2012 was designed to move the National Flood Insurance Program (NFIP) toward risk-based premiums that better reflect expected losses from floods at insured properties. The result of this legislation would have been premium increases for some households which had been paying less than NFIP risk-based premiums, and increased risk-based premiums for all policy holders. Recognizing this possibility, the legislation called on the Federal Emergency Management Agency to propose and evaluate an affordability framework to guide the design of a targeted assistance program to help individuals afford risk-based premiums. This congressionally mandated study from the National Research Council reviews alternative concepts for defining affordability, explains the decisions that must be made when designing an assistance program, and describes alternative ways premiums might be made more affordable. The study also provides insights on the potential conflict between the desires for both risk-based premiums and increasing the purchase of flood insurance.