History of the NFIP
In the mid-twentieth century, national flood issues were addressed by the construction of dams, levees, and sea walls. In the 1920s, the insurance industry assessed flood insurance and came to the conclusion that premiums would be too expensive, leaving only those living in high risk areas as the sole purchasers of flood insurance. As a result, the insurance industry decided not to offer flood insurance. Since flood insurance was not being offered by private insurance companies, Congress realized that flooding could be a significant problem for homes and businesses located in flood plains and that the cost to repair flood damage was exorbitant.
To help make flood insurance affordable, Congress passed the National Flood Insurance Act in 1968 which created the National Flood Insurance Program (NFIP). Initially, the NFIP was to help bear the burden of flood insurance costs through subsidized premiums, to encourage development in areas that carried less risk of flooding, and to strengthen construction codes to help minimize or prevent flood damage. At its launch, the NFIP was part of the Department of Housing and Urban Development (HUD).
Fewer than 100,000 flood insurance policies were carried in early 1972. In June 1972, Hurricane Agnes swept ashore, devastating a large portion of the eastern United States, and causing nearly $4 billion in damages. A congressional investigation in Agnes’ wake discovered that very few buildings were insured for flood, which led Congress to pass the Flood Disaster Protection Act in 1973.
The Flood Disaster Protection Act amended the National Flood Insurance Act of 1968, and made the receipt of federal disaster assistance – in the form of both federal aid and loans from FDIC-insured banks – contingent on carrying flood insurance for buildings located in identified flood zones.
In 1979, the newly-created Federal Emergency Management Agency (FEMA) took ownership of both the Federal Insurance Administration and the NFIP. By the end of the decade, there were nearly 2 million flood insurance policies in force.
5.6 Million Flood Insurance Policies
Thirty-years later, there were approximately 5.6 million flood insurance policies in effect nationwide. Additionally, there have been significant changes to the NFIP. The 1990s saw the creation and implementation of the Community Rating System, which not only increased the amount of flood insurance coverage, but also established a grant program for flood mitigation plans and projects.
Today, more than 20,000 United States communities and territories have access to flood insurance, and as of September 2011 there were more than 200,000 flood insurance policies in effect in South Carolina. More than 100 private insurance companies now offer flood insurance backed by the government on a national level. And while federal assistance remains an essential aspect of disaster recovery, the United States taxpayers are saved millions of dollars each year by the NFIP.
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