National Flood Insurance Program (NFIP)
US federal flood insurance program, structurally in deficit and undergoing a risk-based pricing reform.
The National Flood Insurance Program is the US federal flood insurance program, created in 1968 to offset the withdrawal of private insurers from a risk deemed uninsurable at market price. Managed by the federal emergency management agency, it offers cover to households and businesses in mapped zones, in exchange for the adoption of prevention measures by communities. The program is structurally in deficit, accumulating significant debt to the Treasury after major hurricanes, because its historical rates did not reflect the real risk. The Risk Rating 2.0 reform aims to bring premiums closer to actual risk, generating political tensions when it sharply increases the cost of cover for the most exposed. For private insurance and reinsurance, the NFIP structures the US flood market, with the private sector seeking to reclaim a share of this risk long monopolized by the state.
The NFIP's Risk Rating 2.0 reform, applied to new policies from 1 October 2021, aligns premiums with actual risk and raises the cost of cover for historically underpriced coastal homes.
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