National Flood Insurance Program and Land Management

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Hayley Wise will graduate from the Masters of Coastal and Ocean Policy program this Spring 2016.  She comes to her capstone project with experience in private insurance and administration of the federal government's National Flood Insurance Program. 


The National Flood Insurance Program (NFIP) was introduced in 1968 after the private market failed to carry the risk associated with floods. In addition to offering affordable premiums, the NFIP was tasked with encouraging sound land use, minimizing flood losses, and guiding development away from locations threatened by flood hazards. The latter of the two is where the NFIP fails. The NFIP has become a driver in unsustainable coastal development. 

With 52% of the United States population living in a coastal county the demand for coastal development is high. Developers want to make money, and people want to live near the beach. It has caused poor decision-making, which puts property and life in danger. The NFIP uses subsidized rates to offer affordable premiums to homeowners. These rates do not allow for people to realize the real risk associated with coastal living. There is little financial risk associated with building on the coast. Hurricane Katrina and Hurricane Sandy are extreme but very realistic examples of the damages caused by poor coastal development.  The reliance on man-made structures, such as levees, dikes and sea walls, cannot be our only solution.  

It is my attempt to bring this issue to light and offer ways in which we can build a better coast. Using insurance as a tool to allow people to realize the true risk of coastal building will encourage smarter floodplain development.   In many cases there are building code regulations to reduce the potential of flood damage, however they are often not strictly enforced or only meet minimum standards. It does nothing but endanger a community and put people in harms way if building codes are lax or not enforced. 

The NFIP has a program in place, since 1990, called the Community Rating System (CRS). CRS offers premium discounts for community’s that require higher than the minimum standards for floodplain management. The program uses a class scale system to determine the discounts. Class 9 is a community that participates in the CRS but only to the lowest level. A class 1 is a community that receives the highest discount of 45% off NFIP premiums. There is only 1 community in the United States, Roseville, CA, that is a Class 1 CRS community. Many of the remaining participating communities fall between a Class 8 and 6. The CRS is a great tool but has been plagued with low participation. The CRS points can be earned through a variety of activities.  Here are just a few: 

• Outreach projects
• Hazard disclosure
• Flood protection assistance
• Promote flood insurance
• Open space preservation
• Higher regulatory standards
• Acquisition and relocation
• Floodplain management planning

There are areas around the county that are creating a more resilient coast. One great example of acquisition and relocation is the New Jersey Blue Acres Program. After Extratropical storm Sandy, the state of New Jersey began a program using Federal Disaster money to remove homes from high-risk flood areas. The goal of the program is to reduce the risk of future catastrophic floods, and to help move people out of harm’s path. As of September 2015, The Blue Acres Program had received 519 accepted offers from homeowners to purchase homes. If the homes were damaged during Sandy, the program pays the homeowner pre-damage value. 243 of the 519 homes have completed demolition. The properties will be conserved as green space for recreation and conservation. 

It is not realistic to say every house in danger should be forced to retreat from the coast, but we can create a better and more resilient coast using tools such as the National Flood Insurance Program’s Community Rating System. Instead of throwing money into losses again and again, more funding should be given to prevent losses in the first place. In the long run, this could make the program more successful than its current state. As more and more people move to the coast and as world population continues to grow it is extremely important to make change now to protect the precious coast that we all love.

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