Flood Insurance


The National Flood Insurance Program (NFIP) is the primary source of flood insurance for households and businesses in the United States. Congress created the NFIP in 1968 in response to devastating floods, increasing federal disaster costs, and a lack of flood coverage in the private market. Since then, the program has worked with participating communities to identify and map flood risk, encourage flood risk reduction through the adoption of floodplain management standards, and reduce the cost of disasters by providing incentives and grants for hazard mitigation.

While nearly every community at risk of flooding has joined the NFIP – adopting floodplain regulations and making insurance available to their residents – the program faces myriad challenges. Catastrophic events, increasing development in flood prone areas, and other structural limitations have pushed the program into massive debt. Flood maps too often fail to accurately depict flood risk, while historic cross-subsidies and other rating practices have distorted risk perceptions. With no means-testing in the program, many in need of the financial protection of flood insurance struggle to afford coverage. The NFIP has been on the Government Accountability Office’s High-Risk list for more than a decade and the need for reform has generated significant debate among policymakers.

The Wharton Risk Center conducts the research and analysis needed to adequately understand the NFIP’s shortcomings and provide policymakers the information needed to make effective reforms. Our research spans more than 30 years and covers nearly every aspect of the program, including flood hazard mapping and risk communication, rate-setting and financing catastrophic losses, insurance affordability, and flood risk-reduction.