The National Flood Insurance Program Is Perpetually Underwater. Are There Bipartisan Solutions?  | Article

Key Takeaways: 

• The National Flood Insurance Program is the largest—and sometimes only—source of flood insurance for residential properties in the United States.
• The program has undergone five lapses in funding since fiscal year 2017, and faces continuous challenges of insolvency, multiple loss properties, outdated data, and patchwork flood disclosure laws.
• Congress addressed these threats, and potential solutions, in a March 2026 committee hearing.

Ninety-one percent of natural disasters in the United States involve flooding. Accordingly, the National Flood Insurance Program (NFIP) plays an outsized role in disaster recovery, serving as a public solution to a series of problems that the private insurance industry historically lacks a strong incentive to solve. However, the NFIP has its own set of long-standing issues—including multiple loss properties, outdated maps, and overall insolvency—that have reached a tipping point as extreme weather becomes more dangerous and costly. 

The NFIP was created by Title XIII of the Housing and Urban Development Act of 1968 (P.L. 90-448), and is administered by the Federal Emergency Management Agency’s (FEMA’s) Federal Insurance Directorate. The program is the largest source of flood insurance for residential properties in the United States (at roughly 96% of the flood insurance market and 4.7 million policyholders), and this shows no signs of changing. Around 22,000 communities—the vast majority—participate nationwide. As many first-time homebuyers quickly learn, typical home insurance policies do not cover flood damage. The market can be sparse or nonexistent in areas that have experienced repeated flooding because private insurers often hesitate to take on such high flood risk directly. In areas of high flood risk, the NFIP is the insurer of last resort. 

In addition to providing flood insurance to eligible homeowners, business owners, and renters, the NFIP also operates grant programs like the Flood Mitigation Assistance, Repetitive Flood Claims, and Severe Repetitive Loss grant programs, which together have distributed nearly $1.5 billion in flood grant assistance for community mitigation projects. Anyone living in a municipality that participates in the NFIP is eligible for coverage. Property owners whose mortgage is guaranteed by the federal government are required to have flood insurance if their city or town participates in the NFIP and their home is in a Special Flood Hazard Area (SFHA), defined as an area with a 1% or higher risk of annual flooding. In order to join the NFIP and gain access to its plans, municipalities must adopt floodplain ordinances that minimize development in SFHAs. The resulting curb in construction in floodplains has saved the country $2.4 billion annually in avoided flood losses. 

A March 26 House Financial Services Committee hearing addressed four major bipartisan issues that are increasingly threatening the NFIP’s future: insolvency and “true risk” premiums, multiple loss properties, outdated statistics and maps, and uneven flood disclosure laws. 

 

 

Insolvency Issues

Increasingly, the NFIP has served as a fallback in an unstable insurance market turned upside down by climate change, which brings additional financial exposure to the program. Despite attempts to reduce its financial risk, the NFIP has been insolvent since the aftermath of the 2005 hurricane season, when the country was hit by hurricanes Katrina, Wilma, and Rita. In fiscal year (FY) 2006, the NFIP borrowed $16.6 billion from the U.S. Treasury to pay claims. The program has never financially recovered. After another triple-punch of hurricanes in 2017, the situation was dire enough for Congress to forgive the program’s debt for FY2017—the first time NFIP debt had ever been canceled. Nonetheless, other past debt remains and now totals roughly $22.5 billion. The NFIP has purchased reinsurance (an insurance policy for an insurance provider, where part or all of its losses are covered in the event that it cannot pay out claims) since 2016, in an effort to transfer more of its financial risk to the private sector.

Reauthorizations Without Reform

Disruptions to appropriations is an umbrella issue which destabilizes the NFIP on the whole (NFIP policies cannot be sold nor renewed during government shutdowns). The NFIP has gone through five lapses in appropriations and 35 short-term reauthorizations since FY2017. The Association of State Flood Plain Managers (ASFPM) notes that “the National Flood Insurance Program is essential for protecting communities from flood risk, yet it has been extended over 30 times without significant reform.”

The Government Accountability Office (GAO) reports that the NFIP is financially unsound because current premium rates do not reflect a property’s flood risk, leading the program to pay out more in claims than it collects in premiums. The majority of the NFIP’s budget (the enacted FY2023 budget totaled $4.7 billion) comes from premium payments, and a smaller portion comes from annual Congressional appropriations. Together, these two funding sources are meant to cover the program’s total outlays. But, in practice, outlays are often higher than budgeted. The program takes out loans every time there is a shortfall greater than its budget authority.

At the March 26 hearing, Diane Horn, a flood insurance and emergency management specialist at the Congressional Research Service, explained that as sea levels rise and the intensity of precipitation events increases along with population growth and property values in coastal areas, NFIP premiums no longer reflect the “true risk” of flooding. This is exacerbated by the fact that flood mapping has not kept up with increases in risk. The number of major floods has clearly been increasing over the past 45 years. From 1980 to 2002, an average of 0.65 floods a year caused at least $1 billion in damages (inflation-adjusted) in the United States; from 2003-2025, that number almost doubled, to an average of 1.26 major floods a year.

There are a few methods by which the NFIP could improve its financial sustainability. The most straightforward one is to increase premiums. New “Risk 2.0” scores implemented in 2023 change members’ premiums to reflect the true cost of insuring a property in a flood zone—66% of members’ premiums were projected to go up as a result. 

However, raising rates has drawn concerns about affordability. Alicia Puente Cackley, the director of financial markets and community investment at the GAO, told House Financial Services Committee members that targeted mitigation efforts like elevating, relocating, and floodproofing the highest-risk properties in the NFIP system would lower those properties’ flood risk—and with it, their premiums. The GAO also recommended that Congress authorize and fund means-based assistance for NFIP policyholders unable to afford their full risk premiums, rather than limiting how much premiums can increase each year. Reps. Rob Bresnahan (R-Pa.) and Eugene Vindman (D-Va.) introduced the National Flood Insurance Program Affordability Act (H.R.6934) to establish such a program in December 2025. 

While ASFPM calls Risk 2.0 “long overdue,” that change alone will not fix the insolvency issue: the 66% of premiums that are expected to increase have not yet been priced at “full risk” because premiums can only legally be increased by 18% per year, leading to a projected $27 billion shortfall by 2037. Without any changes, it will be 2037 before 95% of policies are paying their full risk-based rate.

An alternative to increasing premiums is to reduce the impact of disasters through mitigation so that recovery costs less. More importantly, reducing impacts can save lives and livelihoods. Mitigation measures include fortifying homes against flooding with structural upgrades, updating building codes, and conducting home buyouts. Hearing witness Samantha Medlock of Climate Risk Advisors emphasized that funding for mitigation is the single most important thing Congress can do to de-risk the NFIP’s solvency issues. Another witness, Steve Ellis of Taxpayers for Common Sense, added that “the question is whether we invest upfront in mitigation or pay more for disasters.“

A 2020 report from the National Institute of Building Sciences estimated that public-sector mitigation programs from FEMA, the U.S. Economic Development Administration, and the U.S. Department of Housing and Urban Development have saved $6 for every $1 spent since 1995. Witnesses noted that current funding levels for Hazard Mitigation Assistance grant programs, such as FEMA’s recently reinstated Building Resilient Infrastructure and Communities and Hazard Mitigation Grant programs, are insufficient. 

The NFIP’s Albatross: Repetitive Loss Properties

Repetitive loss properties (RLPs) are defined as properties that have flooded at least two times in ten years and received payouts equal or greater than 25% of the property’s value each time. Severe RLPs have received multiple claims payouts totaling more than 100% of the property’s value or at least four different claim payments greater than $5,000 each. One witness at the March committee hearing, Joel Scata of the National Resources Defense Council (NRDC), said that severe RLPs make up 1% of NFIP membership but over 10% of claim payouts. All witnesses noted that the most effective solution to this issue is mitigation—specifically, home buyout programs. Scata noted that these programs currently have 3-5 year wait times from application to buyout, due to inadequate staffing.

Hearing witnesses proposed requiring preapproval for high-risk property buyouts: before a flood, FEMA would pre-approve (guarantee) buyouts to interested homeowners before flooding occurs. Cackley stated that a preapproval mechanism for buyouts for flood-prone homes would allow FEMA to process those buyout applications more quickly. On a related note, Ellis pointed out that FEMA currently processes buyouts one property at a time, instead of whole neighborhoods at once. The latter practice would reduce buyout wait times.

 

More Maps, More Data, More Savings

Updating flood maps and improving NFIP data collection would also go a long way towards ensuring flood damage is properly covered. Horn of the Congressional Research Service noted that the maps used by the NFIP to determine SFHAs only consider coastal and river flooding, and not interior flooding from heavy rainfall. The Risk 2.0 rating takes rain-induced flooding into account, but the maps used to determine eligibility for the NFIP in the first place remain outdated. According to NRDC, 21% of Severe RLPs (see callout box to the right) sit outside FEMA’s mapped high-risk areas, which currently do not account for changing development patterns, rainfall patterns, or predicted future flood conditions. Scata (NRDC) recommended that Congress “require FEMA to map with greater accuracy. FEMA flood maps represent the 1% annual chance flood at the 50th percentile confidence … We are making development decisions based on the flip of a coin. When 40% of NFIP claims come from properties outside the map flood zone, we clearly have a mapping problem.” 

 

The Future of the Private Flood Insurance Market and Flood Disclosures 

Changes to laws governing flood disclosures and real estate transactions would affect the private insurance market in a way that is ultimately beneficial for public disaster spending. In more than one third of states, it is legal to sell a home without disclosing its flood history, even if it floods multiple times a year. Scata noted that homebuyers of previously-flooded homes expect to face $55,000 in damages over a 30-year mortgage loan period. FEMA has found that state and tribal governments that require a seller to disclose more detailed flood information to potential buyers have greater rates of NFIP adoption. Scata strongly recommended that states participating in the NFIP be required to have flood disclosure laws.

 

Proposed Legislative Solutions 

The 119th Congress has introduced an array of bills—many of them bipartisan or bicameral—tackling NFIP deficiencies in part or in whole, including, as of May 2026:

• Enhancing Long-Term, Efficient, and Viable Alternatives to Empower Flood-Prone Communities Act of 2026 (S.4248): would support projects like basement filling, relocation, and home elevation to reduce community flood risk and vulnerability.
• Floodplain Enhancement and Recovery Act (H.R.6256/S.1564): would accelerate certain ecosystem restoration projects in floodplains.
• National Flood Insurance Program Automatic Extension Act of 2025 (H.R.6560/S.3151): would automatically extend NFIP authorization each fiscal year.
• H.R.6620: would allow property owners to satisfy NFIP’s continuous insurance coverage requirements by holding a private insurance policy in between stints of participation in the NFIP and resuming their previous NFIP rates if they reenter the program, relieving some financial pressure. 
• Fixing Emergency Management for Americans Act of 2025 (H.R.4669): would reestablish FEMA as an independent, cabinet-level agency and modify its disaster and hazard mitigation assistance programs, meaning NFIP funding would no longer be tied to Department of Homeland Security funding. 

 

Spending Money to Save Money

All four committee witnesses seemed to agree on one conclusion: when it comes to flooding, the federal government has to spend money to save money. Flood mitigation lessens the NFIP’s financial exposure to climate change, and most importantly protects the lives and livelihoods of Americans from increasingly extreme weather events. The potential solutions—from mitigation grant funding to tax credits to risk rating and affordability programs—are at Congress’s fingertips. Scata closed his remarks saying, “Flooding is getting worse, the communities that can least afford to help themselves suffer most … Congress can fix this.” 

 

Author: Hannah Wilson-Black