Learn more about the report at a free webinar on Wednesday, April 8 at 1 p.m. EDT, featuring a presentation and Q&A session with committee chair Leonard A. Shabman of Resources for the Future and committee members Allen Schirm of Mathematica Policy Research and John Boland of Johns Hopkins University, Baltimore. Register to attend here.   

Date:  March 26, 2015




New Report Describes Options for Providing Affordable Flood Insurance Premiums

WASHINGTON – The National Flood Insurance Program (NFIP) within the Federal Emergency Management Agency faces dual challenges of maintaining affordable flood insurance premiums for property owners and ensuring that revenues from premiums and fees cover claims and program expenses over time.  A new congressionally mandated report from the National Research Council, the operating arm of the National Academy of Sciences, found that these objectives are not always compatible and may, at times, conflict with one another.  The report discusses measures that could make insurance more affordable for all policy holders and provides a framework for policymakers to use in designing targeted assistance programs.


Although there are multiple ways to measure the cost burden of flood insurance on property owners and renters, the report found that there are no objective definitions of affordability.  Where Congress or FEMA determine insurance premiums to be unaffordable, households paying those premiums might be made eligible for assistance through the NFIP.  The report says that it will be up to policymakers to select which households will receive assistance, the form and amount of assistance provided, how it will be provided, who will pay for the assistance, and how an assistance program will be administered.


Implementing a combination of policy measures could help NFIP address affordability issues, the report says. Although it does not recommend whether specific policies should be implemented, it identifies possible measures:

·         Prioritizing existing mitigation grants to households burdened by premiums.  Mitigation could help lower the risk of flood-related damage, in turn reducing expected claims and premiums.

·         Providing loans to financially burdened households for investments in mitigation measures.

·         Issuing vouchers to policy holders for use in paying premiums or offsetting mitigation costs.

·         Expanding the range of mitigation measures that can result in reduced premiums.

·         Encouraging homeowners to choose higher deductibles.

·         Expanding the role of insurance agents in educating policy holders about mitigation and other premium-reducing alternatives.

·         Relying on the U.S. Treasury to help pay claims in catastrophic loss years to allow for lower risk-based premiums and less spending for an assistance program.

·         Community measures that can lower premiums, such as enrollment in the Community Rating System and supporting mitigation that benefits clusters of structures, especially multifamily properties.


The report found that other policies, such as reduced administrative fees, disaster savings accounts, and income tax credits and deductions either may not have an effect on lowering premiums or may not be accessible to cost-burdened policy holders. 


A second Research Council report to follow later this year will propose alternative approaches for a national evaluation of affordability program policy options, informed in part by lessons learned from a proof-of-concept study.



The study was sponsored by the Federal Emergency Management Agency.  The National Academy of Sciences, National Academy of Engineering, Institute of Medicine, and National Research Council make up the National Academies.  They are private, independent nonprofit institutions that provide science, technology, and health policy advice under a congressional charter granted to NAS in 1863.  The National Research Council is the principal operating arm of the National Academy of Sciences and the National Academy of Engineering.  For more information, visit http://national-academies.org.  A committee roster follows.



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Pre-publication copies of Affordability of National Flood Insurance Program Premiums: Report 1 are available from the National Academies Press on the Internet at www.nap.edu  or by calling 202-334-3313 or 1-800-624-6242. Reporters may obtain a copy from the Office of News and Public Information (contacts listed above).



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Division on Earth and Life Studies

Water Science and Technology Board


Division on Engineering and Physical Sciences

Board on Mathematical Sciences and Their Applications


Division of Behavioral and Social Sciences and Education

Committee on National Statistics


Committee on the Affordability of National Flood Insurance Program Premiums


Leonard Shabman (chair)

Resident Scholar

Resources for the Future

Washington, D.C.


Sudipto Banerjee

Professor and Chair

Department of Biostatistics

Fielding School of Public Health

University of California

Los Angeles


John J. Boland

Engineer, Economist, and Professor Emeritus

Department of Geography and Environmental Engineering

Johns Hopkins University



Patrick L. Brockett

Director of the Risk Management and Insurance Program, and

Gus S. Wortham Memorial Chair in Risk Management and Insurance

Department of Management Science and Information Systems

Red McCombs School of Business

University of Texas



Raymond J. Burby

Professor Emeritus

Department of City and Regional Planning

University of North Carolina

Chapel Hill


Scott Edelman

Senior Vice President, and

Director of Water Resources


Greensboro, N.C.


W. Michael Hanemann*

Professor of Economics

Wrigley Chair in Sustainability

School of Sustainability

Arizona State University,

Professor of the Graduate School, and

Chancellor’s Professor Emeritus

Department of Agricultural and Resource Economics

University of California



Carolyn Kousky


Resources for the Future

Washington, D.C.


Howard C. Kunreuther

James G. Dinan Professor, and


Wharton Risk Management and Decision Processes Center

Wharton School of Business

University of Pennsylvania



Shirley Laska

Professor Emerita of Sociology, and

Founding Director

Center for Hazards Assessment, Response and Technology

University of New Orleans

New Orleans


David R. Maidment

Hussein M. Alharthy Centennial Chair in Civil Engineering, and


Center for Research in Water Resources

University of Texas



David I. Maurstad

Director and Senior Vice President

Optimal Solutions and Technologies Inc.

Washington, D.C.


Allen L. Schirm

Director of Methods and Senior Fellow

Mathematica Policy Research Inc.

Washington, D.C.




Jeffrey W. Jacobs

Study Director



*Member, National Academy of Sciences