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Project Title:

Affordability of NFIP Premiums
PIN: DELS-WSTB-13-01        

Major Unit:

Division of Behavioral and Social Sciences and Education
Division on Earth and Life Studies
Division on Engineering and Physical Sciences

Sub Unit: Water Science and Technology Board
Committee on National Statistics
DEPS Board on Mathematical Sciences & Their Applications

RSO: Jacobs, Jeffrey

Subject/Focus Area: Behavioral and Social Sciences; Computers and Information Technology; Earth Sciences; Engineering and Technology; Environment and Environmental Studies; Math, Chemistry and Physics

Project Scope
An ad hoc committee will conduct a Phase 1 study to design alternative approaches that could be used to conduct a cost-benefit analysis of the National Flood Insurance Program, as mandated in Section 236 of the Biggert-Waters Flood Insurance Reform Act of 2012.  The study will be informed by an original analysis that, according to Biggert-Waters, will compare benefits and costs to the federal government of:
•       an insurance program with risk-based premiums combined with means-tested federal assistance, through a voucher program for example, to aid individuals who cannot afford coverage, with;
•       the current system with discounted rates and federally funded disaster relief for those without coverage.

In the Phase 1 study, the committee will prepare a report that designs alternative frameworks that could be used for conducting this benefit-cost analysis (the subject of the Phase 2 study).  This Phase 1 report will describe appropriate methods, data-related needs and issues, potential gaps and limitations, and possible outcomes for the actual cost-benefit analysis, which will be planned separately and carried out as the Phase 2 study.    

Specific issues that will be addressed in the Phase 1 study and report include: 

Methods for establishing an affordability framework, including means-tested vouchers, for the National Flood Insurance Program;
Data issues such as needs, availability, quantity, and quality;
Appropriate and necessary assumptions and definitions, including “affordability” “full risk-based premiums,” and impacts on participation rates;
Appropriate analytical methods and related considerations, including models, computing software, and geographic areas to be analyzed.  

In developing design alternatives for the Phase 2 study, the committee should consider the entire federal costs of flooding when comparing an NFIP with affordability program to one with vouchers.  For example, if a voucher program creates greater participation in the NFIP than subsidies, then the subsidized scenario will need to account for FEMA’s individual assistance, SBA subsidized loans, etc.  In addition to considering costs and benefits to the federal government, the design alternatives will consider costs and benefits as they relate to individuals and communities.

FEMA is in the process of updating and modernizing its risk-based approaches in the NFIP.  In the Phase 1 study design, the committee will consider FEMA’s current approach for establishing risk-based premiums, as well as other approaches to evaluating flood risk that it deems appropriate.

The project is sponsored by the Federal Emergency Management Agency (FEMA).
The approximate start date for the project is September 1, 2013.
The Phase 1 report will be issued at the end of 2014.

Project Duration: 18 months    

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Committee Membership
Committee Membership

 Meeting 1 - 01/30/2014
 Meeting 2 - 03/27/2014
 Meeting 3 - 07/10/2014


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