Background

The National Flood Insurance Program (NFIP) provides federally backed flood insurance that encourages communities to enact and enforce floodplain regulations. Since its inception in 1968, the program has been very successful in helping flood victims get back on their feet. There are nearly 4.6 million policies in force, with about $2 billion in written premiums. From 1978 through 2004, over 940,000 losses totaling almost $14 billion have been paid.

To be covered by a flood insurance policy, a property must be in a community that participates in the NFIP. To qualify for the program, a community adopts and enforces a floodplain management ordinance to regulate development in flood hazard areas. The basic objective of the ordinance is to ensure that such development will not aggravate existing flooding conditions and that new buildings will be protected from flood damage. Today, over 19,000 communities participate in the NFIP.

The NFIP has been successful in requiring new buildings to be protected from damage by a 100-year flood. However, flood damage still results from floods greater than the 100-year flood and from flooding in unmapped areas. Under the Community Rating System (CRS), there is an incentive for communities to do more than just regulate construction of new buildings to minimum national standards. Under the CRS, flood insurance premiums are adjusted to reflect community activities that reduce flood damage to existing buildings, manage development in areas not mapped by the NFIP, protect new buildings beyond the minimum NFIP protection level, help insurance agents obtain flood data, and help people obtain flood insurance.