National Flood Insurance Program: Continued Progress Needed to Fully Address Prior GAO Recommendations on Rate-Setting Methods

US Government Accountability Office

Why GAO Did This Study

NFIP, which is administered by FEMA, provided insurance to help protect over 5.1 million policyholders against flood losses in 2015. The program has struggled financially in its attempts to keep rates affordable and pay for losses from catastrophic flooding. GAO has previously identified a number of challenges to FEMA’s rate-setting process, including the lack of updated information in the model and the impact of charging rates that do not fully reflect flood risk. GAO was asked to review FEMA’s current rate-setting methods.

This report (1) examines FEMA’s current methods for setting rates and compares them with practices used by private insurers and (2) identifies steps FEMA has taken to address recommendations from GAO’s October 2008 and July 2013 reports. GAO reviewed documentation on the methods FEMA uses to set NFIP rates, and interviewed FEMA officials, risk modeling experts, and insurance industry officials who were selected on the basis of their experience.

What GAO Recommends

GAO makes no new recommendations but maintains that those from its 2008 and 2013 reports still have merit and should be fully addressed. These recommendations included ensuring that FEMA’s rate-setting methods accurately reflect flood risks, collecting data to analyze the impact of grandfathered properties, and obtaining the flood risk data needed to determine full-risk rates for subsidized properties. FEMA concurred with our past recommendations and described plans to implement them.


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