Tying Flood Insurance to Flood Risk for Low-Lying Structures in the Floodplains

National Academy Press
http://bit.ly/1GdV119

The National Flood Insurance Program (NFIP) was created in 1968 to reduce the flood risk to individuals and their reliance on federal disaster relief by making federal flood insurance available to residents and businesses if their community adopted floodplain management ordinances and minimum standards for new construction in flood prone areas. Insurance rates for structures built after a flood plain map was adopted by the community were intended to reflect the actual risk of flooding, taking into account the likelihood of inundation, the elevation of the structure, and the relationship of inundation to damage to the structure. Today, rates are subsidized for one-fifth of the NFIP’s 5.5 million policies. Most of these structures are negatively elevated, that is, the elevation of the lowest floor is lower than the NFIP construction standard. Compared to structures built above the base flood elevation, negatively elevated structures are more likely to incur a loss because they are inundated more frequently, and the depths and durations of inundation are greater.

Tying Flood Insurance to Flood Risk for Low-Lying Structures in the Floodplains studies the pricing of negatively elevated structures in the NFIP. This report review current NFIP methods for calculating risk-based premiums for these structures, including risk analysis, flood maps, and engineering data. The report then evaluates alternative approaches for calculating risk-based premiums and discusses engineering hydrologic and property assessment data needs to implement full risk-based premiums. The findings and conclusions of this report will help to improve the accuracy and precision of loss estimates for negatively elevated structures, which in turn will increase the credibility, fairness, and transparency of premiums for policyholders.

[Dot Earth] Federal flood insurance in the United States is a mess, with politics continuing to trump data, and taxpayers paying the price.  Just track the heroic passage of the Biggert-Waters Flood Insurance Reform Act in 2012 and its subsequent gutting as property owners howled. The followup bill in 2014 had a name that perfectly reflects the irrational nature of what transpired: Homeowner Flood Insurance Affordability Act.

Will we ever have a Homeowner Taking Responsibility for Building in Flood Zones Act?

With all of this in mind, even amid Papalpalooza over #PopeforPlanet, it’s worth drawing attention to the new National Research Council report aiming to clarify the risk, putting the onus back on Congress and the White House to figure out how to put more of the responsibility for building in harm’s way on those doing the building. Read on for a summary from the National Academy of Sciences and link to the report…

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