**NATIONAL FLOOD INSURANCE PROGRAM**

####### PROGRAM DESCRIPTION

**August 1, 2002**

![](media/image1.jpeg){width="1.1770833333333333in" height="1.15625in"}

Federal Emergency Management Agency

Federal Insurance and Mitigation Administration

####### National Flood Insurance Program

### 

The U.S. Congress established the National Flood Insurance Program
(NFIP) with the passage of the National Flood Insurance Act of 1968. The
NFIP is a Federal program enabling property owners in participating
communities to purchase insurance as a protection against flood losses
in exchange for State and community floodplain management regulations
that reduce future flood damages. Participation in the NFIP is based on
an agreement between communities and the Federal Government. If a
community adopts and enforces a floodplain management ordinance to
reduce future flood risk to new construction in floodplains, the Federal
Government will make flood insurance available within the community as a
financial protection against flood losses. This insurance is designed to
provide an insurance alternative to disaster assistance to reduce the
escalating costs of repairing damage to buildings and their contents
caused by floods.

**Purpose of this Document:**

The purpose of this document is to provide a comprehensive description
of the NFIP intended for use by FEMA staff and NFIP constituents. It
provides an overview and history of the Program and covers all three
aspects of the Program: 1) floodplain identification and mapping; 2)
floodplain management; and 3) flood insurance.

NFIP activities that are described in detail in this document include:

-   How flood-prone areas are identified and mapped;

-   FEMA's map modernization initiative;

-   The floodplain management requirements a community must adopt and
    enforce;

-   FEMA's community assistance and monitoring activities;

-   How flood insurance is sold;

-   What structures are eligible for flood insurance coverage and the
    amount of coverage available;

-   How flood insurance policies are rated and claims are paid;

-   The Community Rating System; and

-   The Flood Mitigation Assistance program.

This document also includes a description of the Mandatory Purchase of
Flood Insurance Requirement and how this requirement relates to the
NFIP. Finally, it includes a description of other FEMA programs and
activities that provide mitigation assistance and planning assistance in
reducing the Nation's flood losses.

A list of acronyms used in this description is provided at the end of
the document.

[Federal Emergency Management Agency's Mission
1](#federal-emergency-management-agencys-mission)

[Overview of the NFIP 1](#overview-of-the-nfip)

[Flood Hazard Identification and Risk Assessment
4](#flood-hazard-identification-and-risk-assessment)

[The "100-year" Standard 5](#the-100-year-standard)

[Identifying and Mapping Flood-Prone Areas
5](#identifying-and-mapping-flood-prone-areas)

[Flood Mapping Process 7](#__RefHeading___Toc2760790)

[Depiction of Levee Systems and Floodwall Systems on NFIP Maps
8](#__RefHeading___Toc2760791)

[Changes to the Flood Maps 9](#changes-to-the-flood-maps)

[Mapping the Coastal Barrier Resource System or Otherwise Protected
Areas
10](#mapping-the-coastal-barrier-resource-system-or-otherwise-protected-areas)

[Map Modernization Program 10](#map-modernization-program)

[Mapping Future Conditions 12](#mapping-future-conditions)

[Floodplain Management 12](#floodplain-management)

[Minimum NFIP Floodplain Management Requirements
13](#minimum-nfip-floodplain-management-requirements)

[Ordinance Adoption 16](#ordinance-adoption)

[Monitoring Community Compliance 17](#monitoring-community-compliance)

[Actions Against Communities For Failure to Enforce
18](#actions-against-communities-for-failure-to-enforce)

[Actions Against Individual Properties For Failure to Comply
19](#actions-against-individual-properties-for-failure-to-comply)

[State Floodplain Management Role 20](#state-floodplain-management-role)

[Post-Disaster Assessments 20](#post-disaster-assessments)

[Providing Technical Assistance 21](#providing-technical-assistance)

[Flood Insurance 22](#flood-insurance)

[Sale of Flood Insurance 22](#sale-of-flood-insurance)

[Flood Insurance Policy 23](#flood-insurance-policy)

[Eligible Structures 23](#eligible-structures)

[Coastal Barrier Resources System 24](#coastal-barrier-resources-system)

[Waiting Period 25](#waiting-period)

[Coverage Amounts 25](#coverage-amounts)

[Other Coverages 26](#other-coverages)

[Ratemaking 26](#ratemaking)

[Claims 27](#claims)

[Marketing 29](#marketing)

[Mandatory Flood Insurance Purchase Requirement
29](#mandatory-flood-insurance-purchase-requirement)

[Other NFIP Activities 31](#other-nfip-activities)

[Community Rating System 31](#community-rating-system)

[Flood Mitigation Assistance Program
33](#flood-mitigation-assistance-program)

[Other FEMA Programs 34](#other-fema-programs)

[Hazard Mitigation Grant Program 34](#hazard-mitigation-grant-program)

[Disaster Mitigation Act of 2000 35](#disaster-mitigation-act-of-2000)

[Planning Initiatives 36](#planning-initiatives)

[A Key To The Acronyms Used In This Document
37](#a-key-to-the-acronyms-used-in-this-document)

# Federal Emergency Management Agency's Mission

The Federal Emergency Management Agency (FEMA) is an independent Federal
agency reporting to the President. Founded in 1979, FEMA's mission is
to:

*Lead America to prepare for, prevent, respond to, and recover from
disaster.*

FEMA is responsible for coordinating the Federal response to floods,
earthquakes, hurricanes, and other natural or man-made disasters and
providing disaster assistance to States, communities and individuals.
Disasters are declared by the President at the request of the Governor
of the impacted State if the impacts of the disaster exceed the ability
of the State and the affected communities to respond. For declared
disasters, FEMA activates the Federal Response Plan with 27 signatory
agencies. The Federal Response Plan provides a framework for the
coordination of assistance to States, communities, and individuals by
Federal agencies.

The Federal Insurance and Mitigation Administration (FIMA) within FEMA
is responsible for administering the National Flood Insurance Program
(NFIP) and administering programs that provide assistance for mitigating
future damages from natural hazards.

FEMA also provides training and technical assistance to governmental and
non-governmental entities in preparing for and responding to disasters
and for protecting against future disasters through mitigation. In
addition to a headquarters office in Washington, D.C., FEMA has 10
regional offices.

# Overview of the NFIP

Up until 1968, Federal actions related to flooding were primarily
responses to significant events that resulted in using structural
measures to control flooding. Major riverine flood disasters of the
1920's and 1930's led to considerable Federal involvement in protecting
life and property from flooding through the use of structural
flood-control projects, such as dams and levees, with the passage of the
Flood Control Act of 1936. Generally, the only available financial
recourse to assist flood victims was in the form of disaster assistance.
Despite the billions of dollars in Federal investments in structural
flood-control projects, the losses to life and property and the amount
of assistance to disaster victims from floods continued to increase.

As early as the 1950's, when the feasibility of providing flood
insurance was first proposed, it became clear that private insurance
companies could not profitably provide such coverage at an affordable
price, primarily because of the catastrophic nature of flooding and the
inability to develop an actuarial rate structure which could adequately
reflect the risk to which flood-prone properties are exposed. Congress
proposed an experimental program designed to demonstrate the feasibility
of the private sector providing flood insurance by enacting the Federal
Insurance Act of 1956, but this Act was never implemented.

In recognition of increasing flood losses and disaster relief costs,
major steps were taken in the 1960's to redefine Federal policy and
approaches to flood control. In 1965, Congress passed the Southeast
Hurricane Disaster Relief Act. The Act was as a result of the extensive
damage caused by Hurricane Betsy in the Gulf States. The Act provided
financial relief for the flooding victims and authorized a feasibility
study of a national flood insurance program. The resulting report was
entitled, "Insurance and Other Programs for Financial Assistance to
Flood Victims". Shortly thereafter, the Bureau of the Budget Task Force
on Federal Flood Control in 1966 advocated a broader perspective on
flood control within the context of floodplain development in House
Document 465, "A Unified National Program for Managing Flood Losses".
House Document 465 included five major goals:

-   Improve basic knowledge about flood hazards;

-   Coordinate and plan new developments in the floodplain;

-   Provide technical services;

-   Move toward a practical national program of flood insurance; and

-   Adjust Federal flood control policy to sound criteria and changing
    needs.

House Document 465 and the prior feasibility study provided the basis
for the National Flood Insurance Act of 1968. The primary purposes of
the 1968 Act creating the NFIP are to:

-   Better indemnify individuals for flood losses through insurance;

-   Reduce future flood damages through State and community floodplain
    management regulations; and

-   Reduce Federal expenditures for disaster assistance and flood
    control.

Section 1315 of the 1968 Act is a key provision that prohibits FEMA from
providing flood insurance unless the community adopts and enforces
floodplain management regulations that meet or exceed the floodplain
management criteria established in accordance with Section 1361(c) of
the Act. These floodplain management criteria are contained in 44 Code
of Federal Regulations (CFR) Part 60, Criteria for Land Management and
Use. The emphasis of the NFIP floodplain management requirements is
directed toward reducing threats to lives and the potential for damages
to property in flood-prone areas. Over 19,700 communities presently
participate in the NFIP. These include nearly all communities with
significant flood hazards.

In addition to providing flood insurance and reducing flood damages
through floodplain management regulations, the NFIP identifies and maps
the Nation's floodplains. Mapping flood hazards creates broad-based
awareness of the flood hazards and provides the data needed for
floodplain management programs and to actuarially rate new construction
for flood insurance.

When the NFIP was created, the U.S. Congress recognized that insurance
for "existing buildings" constructed before a community joined the
Program would be prohibitively expensive if the premiums were not
subsidized by the Federal Government. Congress also recognized that most
of these flood-prone buildings were built by individuals who did not
have sufficient knowledge of the flood hazard to make informed
decisions. Under the NFIP, "existing buildings" are generally referred
to as Pre-FIRM (Flood Insurance Rate Map) buildings. These buildings
were built before the flood risk was known and identified on the
community's FIRM. Currently about

26 percent of the 4.3 million NFIP policies in force are Pre-FIRM
subsidized compared to 70 percent of the policies being subsidized in
1978.

In exchange for the availability of subsidized insurance for existing
buildings, communities are required to protect new construction and
substantially improved structures through adoption and enforcement of
community floodplain management ordinances. The 1968 Act requires that
full actuarial rates reflecting the complete flood risk be charged on
all buildings constructed or substantially improved on or after the
effective date of the initial FIRM for the community or after December
31, 1974, whichever is later. These buildings are generally referred to
as "Post-FIRM" buildings.

Early in the Program's history, the Federal Government found that
providing subsidized flood insurance for existing buildings was not a
sufficient incentive for communities to voluntarily join the NFIP nor
for individuals to purchase flood insurance. Tropical Storm Agnes in
1972, which caused extensive riverine flooding along the east coast,
proved that few property owners in identified floodplains were insured.
This storm cost the Nation more in disaster assistance than any previous
disaster. For the Nation as a whole, only a few thousand communities
participated in the NFIP and only 95,000 policies were in force.

As a result, Congress passed the Flood Disaster Protection Act of 1973.
The 1973 Act prohibits Federal agencies from providing financial
assistance for acquisition or construction of buildings and certain
disaster assistance in the floodplains in any community that did not
participate in the NFIP by July 1,1975, or within 1 year of being
identified as flood-prone.

Additionally, the 1973 Act required that Federal agencies and federally
insured or regulated lenders had to require flood insurance on all
grants and loans for acquisition or construction of buildings in
designated Special Flood Hazard Areas (SFHAs) in communities that
participate in the NFIP. This requirement is referred to as the
Mandatory Flood Insurance Purchase Requirement. The SFHA is that land
within the floodplain of a community subject to a 1 percent or greater
chance of flooding in any given year, commonly referred to as the
100-year flood.

The Mandatory Flood Insurance Purchase Requirement, in particular,
resulted in a dramatic increase in the number of communities that joined
the NFIP in subsequent years. In 1973, just over 2,200 communities
participated in the NFIP. Within 4 years, approximately 15,000
communities had joined the Program. It also resulted in a dramatic
increase in the number of flood insurance policies in force. In 1977,
approximately 1.2 million flood insurance policies were in force, an
increase of almost 900,000 over the number policies in force in December
of 1973.

The authors of the original study of the NFIP thought that the passage
of time, natural forces, and more stringent floodplain management
requirements and building codes would gradually eliminate the number of
Pre-FIRM structures. Nevertheless, modern construction techniques have
extended the useful life of these Pre-FIRM buildings beyond what was
originally expected. However, their numbers overall continue to
decrease. The decrease in the number of Pre-FIRM buildings has been
attributed to a number of factors such as, severe floods in which
buildings were destroyed or substantially damaged, redevelopment,
natural attrition, acquisition of flood damaged structures, as well as
flood control projects.

In 1994, Congress amended the 1968 Act and the 1973 Act with the
National Flood Insurance Reform Act (NFIRA). The 1994 Act included
measures, among others, to:

-   Increase compliance by mortgage lenders with the mandatory purchase
    requirement and improve coverage;

-   Increase the amount of flood insurance coverage that can be
    purchased;

-   Provide flood insurance coverage for the cost of complying with
    floodplain management regulations by individual property owners
    (Increased Cost of Compliance coverage);

-   Establish a Flood Mitigation Assistance grant program to assist
    States and communities to develop mitigation plans and implement
    measures to reduce future flood damages to structures;

-   Codify the NFIP's Community Rating System; and

-   Require FEMA to assess its flood hazard map inventory at least once
    every 5 years.

Funding for the NFIP is through the National Flood Insurance Fund, which
was established in the Treasury by the 1968 Act. Premiums collected are
deposited into the fund, and losses, and operating and administrative
costs are paid out of the fund. In addition, the Program has the
authority to borrow up to \$1.5 billion from the Treasury, which must be
repaid along with interest. Until 1986, Federal salaries and program
expenses, as well as the costs associated with flood hazard mapping and
floodplain management were paid by an annual appropriation from
Congress. From 1987 to 1990, Congress required the Program to pay these
expenses out of premium dollars. When expressed in current dollars,
\$485 million of policyholder premiums were transferred to pay salary
and other expenses of the Program. Beginning in 1991, a Federal policy
fee of \$25 dollars, which was increased to \$30 in 1995, is applied to
most policies in order to generate the funds for salaries, expenses, and
mitigation costs.

The three basic components of the Program -- identifying and mapping
flood-prone communities, the requirement that communities adopt and
enforce floodplain management regulations, and the provision of flood
insurance -- are described in detail below. Other aspects and components
of the Program, including the Mandatory Purchase Requirement, the
Community Rating System and the Flood Mitigation Assistance program, are
also described.

# 

# Flood Hazard Identification and Risk Assessment

The Director of FEMA is required by statute to identify and map the
Nation's flood-prone areas and to establish flood-risk zones in such
areas. Flood hazard maps have been issued for over 19,200 communities at
a cost of over \$1.5 billion (actual dollars) \[\$2.8 billion in 2001
dollars\]. To date, approximately 100,000 flood map panels have been
produced depicting approximately 150,000 square miles of floodplain
areas.

The FEMA flood hazard maps are used an estimated 15 million times
annually for State and community floodplain management regulations, for
calculating flood insurance premiums, and for determining whether
property owners are required by law to obtain flood insurance as a
condition of obtaining mortgage loans or other Federal or federally
related financial assistance. FEMA's flood hazard maps are also used by
States and communities for emergency management

and for land use and water resources planning and by Federal agencies
implementing Executive Order 11988, Floodplain Management for Federal
actions proposed in or affecting floodplains.

## The "100-year" Standard 

The NFIP would not be able to offer insurance at affordable rates
without the existence of risk management (floodplain management) to
reduce flood losses. In order to assess and manage the flood risk, a
national standard was needed. The U.S. Department of Housing and Urban
Development, which initially administered the NFIP before FEMA was
created, began its administration of the NFIP by calling on a group of
experts to advise the agency as to the best standard to be used as the
basis for risk assessment, insurance rating, and floodplain management
for the Program. After extensive study and coordination with Federal and
State agencies, this group recommended the 1-percent-annual-chance flood
(also referred to as the 100-year or "Base Flood") be used as the
standard for the NFIP.

The 1-percent-annual-chance flood was chosen on the basis that it
provides a higher level of protection while not imposing overly
stringent requirements or the burden of excessive costs on property
owners. The 1-percent-annual-chance flood (or 100-year flood) represents
a magnitude and frequency that has a statistical probability of being
equaled or exceeded in any given year, or, stated alternatively, the
100-year flood has a 26 percent (or 1 in 4) chance of occurring over the
life of a 30-year mortgage.

In 1973, the Senate Committee on Banking, Housing and Urban Affairs,
which had oversight responsibility for the NFIP, heard arguments on both
sides on the appropriateness of the 100-year base flood standard. The
Committee concluded that the 1-percent-annual-chance flood was
reasonable and consistent with national objectives in reducing flood
losses. In 1981, the Office of Management and Budget (OMB) directed FEMA
to review the use of the 1-percent-annual- chance flood as part of the
President's 1981 Task Force on Regulatory Relief. In its report to OMB,
FEMA reaffirmed the overwhelming support for the Base Flood standard in
responses from the public and private sector.

The 1-percent-annual-chance flood is a regulatory standard used by
Federal agencies, and most States, to administer floodplain management
programs. The 1-percent-annual-chance flood standard has been used since
the inception of the NFIP and is used for floodplain management purposes
in all of the 19,200 participating communities that have been issued
flood hazard maps.

## Identifying and Mapping Flood-Prone Areas 

To meet the objective that studies be conducted to accurately assess the
flood risk within each flood-prone community, the 1968 Act called
for: 1) the identification and publication of information within five
years for all floodplain areas that have special flood hazards; and 2)
the establishment of flood-risk zones in all such areas to be completed
over a 15-year period following passage of the Act.

When the NFIP was initially established, communities had to have been
mapped and have flood-risk zones established before they could
participate in the Program. Within the first year of NFIP's operation,
it became evident that the time required to complete the detailed flood
insurance studies would markedly delay implementation of the Program in
many flood-prone communities. As a result, an interim means for more
rapid community participation in the NFIP had to be provided. The
Housing and Urban Development Act of 1969 expanded participation by
authorizing an Emergency Program under which insurance coverage could be
provided at non-actuarial, federally subsidized rates in limited amounts
during the period prior to completion of a community's Flood Insurance
Study (FIS).

Until an FIS could be conducted, Flood Hazard Boundary Maps, which
delineated the boundaries of the community's SFHAs, were prepared using
approximate methods. These methods identified on an approximate basis a
1-percent-annual-chance floodplain, but did not include the
determination of Base Flood Elevations (BFEs) (100-year flood
elevations), flood depths, or floodways. The Flood Hazard Boundary Map
was intended to assist communities in managing floodplain development,
and to assist insurance agents and property owners in identifying those
areas where the purchase of flood insurance was advisable.

FISs that use detailed hydrologic and hydraulic analyses to develop BFEs
and designate floodways and risk zones for developed areas of the
floodplain were subsequently produced for most NFIP communities. Once
more detailed risk data were provided to communities, the community
could enter the Regular Program whereby the community is required to
adopt more comprehensive floodplain management requirements and owners
of structures could purchase higher amounts of insurance.

In producing and updating FISs, FEMA typically uses a combination of two
study approaches (approximate and detailed) in identifying a community's
flood hazards. Detailed study methods typically employ the use of
engineering models and, at a minimum, result in the determination of
BFEs or flood depths and floodways that will be displayed on the FIRM.
In general, the decision whether to use the approximate method or
detailed method is based on existing and anticipated development in and
near the floodplain. Flood hazard information for flooding sources that
affect developed or developing areas are based on detailed studies
whenever possible; approximate study methods, which are less rigorous
than detailed methods and do not determine BFEs or floodways, may be
used for undeveloped or sparsely developed areas.

An FIS usually generates the following flood hazard information:

-   BFEs are presented as either water-surface elevations or average
    depths of flow above the ground surface. These elevations and depths
    are usually referenced to either the National Geodetic Vertical
    Datum of 1929 (NGVD29) or the North American Vertical Datum of 1988
    (NAVD88).

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-   Water-surface elevations for the 10-year (10-percent-annual-chance),
    50-year (2-percent-annual-chance), 100-year
    (1-percent-annual-chance), and 500-year (0.2-percent-annual-chance)
    floods.

-   Boundaries of the regulatory 100-year floodway. The regulatory
    floodway is defined as the channel of a stream plus any adjacent
    floodplain areas that must be kept free of encroachment so that the
    entire Base Flood (100-year flood) discharge can be conveyed with no
    greater than a 1.0-foot increase in the BFE.

-   The boundaries of the 100- and 500-year floodplains. The 100-year
    floodplain is referred to as the Special Flood Hazard Area (SFHA).

The results of the FIS are presented on a map, referred to as a Flood
Insurance Rate Map (FIRM), and presented in the FIS report in a
narrative and graphically as flood profiles attached to the narrative.
FEMA determines the 1-percent-annual-chance flood, shown on the FIRMs as
A Zones or V Zones, from information that obtained through consultation
with the community, and from floodplain topographic surveys, detailed
hydrologic and hydraulic analyses, and historic records. FEMA uses
commonly accepted computer models and engineering methods that estimate
hydrologic and hydraulic conditions to determine the
1-percent-annual-chance flood, to determine BFEs, and to designate
flood-risk zones.

FEMA defines technical requirements, product specifications for Flood
Hazard Maps and related NFIP products, and associated coordination and
documentation activities in *Guidelines and* *Specifications* *for Flood
Hazard Mapping Partners*, dated February 2002. The Guidelines, which are
used to prepare FISs and restudies, provide information for the
evaluation of riverine and alluvial fan flood hazards, coastal flooding
and flood-related erosion, and flood hazards along the Great Lakes. The
Guidelines also include procedures for conducting hydrologic and
hydraulic analyses of a flooding source or sources in order to establish
BFEs. Also, included in the Guidelines is information on process and
products associated with the Cooperative Technical Partners initiative,
digital Flood Insurance Rate Map (DFIRM) specifications, and the option
of including a flood hazard zone reflecting future conditions on the
FIRM when requested by the community.

Along rivers, streams, and lakes within the United States, FEMA computes
flood elevations using computer models, statistical techniques, or both.
These elevations are a function of the amount of water expected to enter
a particular system by means of precipitation and runoff. The SFHAs in
riverine areas are primarily identified as "A Zones" on the FIRM.

Along the coast, FEMA determines SFHAs by an analysis of storm surge,
wind direction and speed, wave heights, and other factors. FEMA
designates these areas along the coast as both V Zones and A Zones on
the FIRM. V Zones are the more hazardous coastal flood zones because
they are subject to high velocity wave action. FEMA applies the V-Zone
designation to those areas along the coast where water depth and other
conditions would support at least a 3-foot wave height. FEMA also
considers other factors in identifying V Zones, such as wave run-up.
FEMA usually designates A Zones in coastal areas landward of the V Zone.
Coastal flood hazards areas mapped as A Zones can be subject to storm
surge and damaging waves; however, the waves are less than 3 feet in
height.

## Flood Mapping Process

Over 10,000 communities have been provided detailed FISs and have been
issued FIRMs that include BFEs for Zones AE, A1-30, AH, AO, AR/AE,
AR/A1-30, AR/AO, AR/AH, VE, and V1-30. Most of these NFIP communities
will have FIRMs that include a combination of SFHAs that have been
studied in detail with BFEs and floodway data and SFHAs that have been
studied using approximate methods which have been designated Zone A
without BFEs or floodway designations.

A draft FIS can be prepared by a study contractor to FEMA under the NFIP
Regulations at 44 CFR Part 66 or by appellants under 44 CFR Part 65 for
the purpose of establishing or revising BFE and floodway data. FEMA
reviews and modifies, as appropriate, the draft FIS to ensure it
complies with established NFIP criteria. Once FEMA has received and
approved the draft FIS,

FEMA releases the information to the public as a Preliminary FIS and
FIRM for review and comment during a statutory 90-day appeal period
before proposed elevations become effective.

During the appeal period, any owner or lessee of real property within
the community where the proposed elevation determination has been made
may file a written appeal. The appeal must be based on a demonstration
that the elevations proposed by FEMA are scientifically and/or
technically incorrect. Until such time as the 90-day appeal period is
completed and the community is provided with a notice of final flood
elevation determination, the BFE and floodway data in the FIS are
considered preliminary and subject to change. During the preparation and
review of the FIS and the appeals, FEMA coordinates closely with State
and local officials and presents its findings at public meetings.

## Depiction of Levee Systems and Floodwall Systems on NFIP Maps 

FEMA does not design, construct, fund, or approve levee systems or
floodwall systems. However, FEMA has developed stringent criteria that
must be met before any system can be depicted as providing protection
from the 1-percent-annual-chance flood on a FIRM. Once the criteria in
the NFIP regulations have been met, FEMA will remove the property behind
the levee or floodwall from the 1-percent-annual-chance floodplain.
FEMA's review of a levee or floodwall system is for the sole purpose of
establishing appropriate risk-zone determinations for NFIP maps and does
not constitute a determination or warranty by FEMA as to how a structure
or system will perform in a flood event. Because of the potentially
devastating effects to life and property should a levee or floodwall
fail or be overtopped, FEMA takes special care in considering the
impacts of such structures on flood hazards.

FEMA recognizes only a levee system or floodwall system that meets, and
continues to meet, minimum design standards that provide protection from
the 1-percent-annual-chance flood. Specifically, the criteria
established in 44 CFR §65.10 must be satisfied before a levee may be
credited and mapped as providing protection from the
1-percent-annual-chance flood event. The criteria include:

-   **Design criteria,** which address minimum freeboard above flood
    height, closure devices for any openings, embankment protection,
    embankment and foundation stability, settlement, and interior
    drainage. All data submitted to demonstrate compliance with these
    structural requirements must be certified by a registered
    professional engineer. In lieu of submitting these data, a Federal
    agency with responsibility for levee design may certify that the
    levee and/or levee system provides adequate protection against the
    1-percent-annual-chance flood.

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-   **Operations plan and criteria**, which address operation of
    closures and interior drainage systems during a flood event.
    Operations for a levee system must be under the jurisdiction of a
    Federal or State agency, an agency created by Federal or State law,
    or an agency established by a community participating in the NFIP.

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-   **Maintenance plans and criteria** require an officially adopted
    maintenance plan. At a minimum, the plan must specify the
    maintenance activities to be performed, the frequency of their
    performance, and the person responsible for their performance. All
    maintenance activities must be performed under the jurisdiction of a
    Federal or State agency, an agency created by a Federal or State
    law, or an agency of a community participating in the NFIP.

## Changes to the Flood Maps 

The flood risk information presented on the FIRM and in the FIS report
forms the technical basis for the administration of the NFIP. FEMA
exercises great care to ensure that the analytical methods employed in
the FISs are scientifically and technically correct, that the
engineering standards followed meet professional standards, and,
ultimately, that the results of the FIS are accurate. Although the NFIP
maps and FIS reports are prepared according to rigorous technical
standards, FEMA recognizes that changes to the maps and reports may be
necessary. Some reasons for the changes are due to improvements in the
techniques used in assessing flood risks, changes in physical conditions
in the floodplains or watersheds, and the availability of new scientific
or technical data.

In addition, the limitations imposed by the scales at which the maps are
prepared may result in individual properties being inadvertently
included in SFHAs. FEMA has developed a process, referred to as a Letter
of Map Amendment (LOMA), to correct these inadvertent inclusions. A LOMA
results from an administrative procedure that involves the review of
technical data submitted by the owner or lessee of property who believes
the property has incorrectly been included in a designated SFHA. A LOMA
amends the currently effective FEMA map and establishes that a specific
property is not located in an SFHA, thereby removing the Mandatory Flood
Insurance Purchase Requirement.

FEMA has similarly established administrative procedures for changing
effective maps based on new or revised scientific or technical data that
reflect other changes to the floodplain including projects such as fill
and flood control measures. The map actions are referred to as Letter of
Map Revision based on Fill (LOMR-F) and Letter of Map Revision (LOMR)
respectively.

The NFIP regulations allow FEMA to revise and amend maps and FIS
reports, as warranted, or after it receives requests from community
officials and individual property owners. To help FEMA ensure that the
maps and reports present information that accurately reflects existing
flood risks, the NFIP regulations require that each NFIP community
inform FEMA of any physical changes that affect BFEs in the community
and, within 6 months of the date that such data are available, submit
those data that show the effects of the changes.

In making revisions and amendments, FEMA must adhere to the same
engineering standards applied in the preparation of the original NFIP
maps and FIS reports. Therefore, when requesting changes to NFIP maps
and reports, community officials and property owners are required to
submit adequate supporting data. Those data enable FEMA to review and
evaluate the requests and to carry out its responsibility of ensuring
that the flood-risk information presented is scientifically and
technically correct.

Because LOMAs, LOMR-Fs, and LOMRs officially amend or revise the flood
maps, they must reflect existing conditions, such as an "as-built"
project. Communities, developers, and property owners also frequently
submit requests for proposed projects in floodplain areas to FEMA for
review and comment. Such requests typically include data and analyses of
the pre- and post-project conditions so that FEMA can ascertain the
impact on flood hazards of the proposed project. FEMA reviews such
requests using the same data and engineering standards that are used for
"as-built" requests. FEMA's response is provided in the form of a
"conditional" LOMA, LOMR-F, or LOMR, which state whether the proposed
project, if built as proposed, would justify a map revision. A
conditional LOMA, LOMR-F, or LOMR does not constitute a building permit;
the authority to approve projects and issue building permits lies with
the local community and, in some instances, State agencies.

## Mapping the Coastal Barrier Resource System or Otherwise Protected Areas 

Congress passed the Coastal Barrier Resources Act in 1982 and the
Coastal Barrier Improvement Act in 1990, defining and establishing a
system of protected coastal areas (including the Great Lakes) and
Otherwise Protected Areas (OPAs) known as the Coastal Barrier Resources
System (CBRS). The Acts provide protection to CBRS areas by prohibiting
most expenditures of Federal funds in CBRS areas, including the sale of
flood insurance for buildings constructed or substantially improved
after the effective date of the CBRS area. These prohibitions refer to
\"any form of loan, grant, guarantee, insurance, payment, rebate,
subsidy or any other form of direct or indirect Federal assistance,\"
with specific and limited exceptions.

Congress designated the initial CBRS areas in 1982 and is the only
entity that may authorize a revision to CBRS boundaries. Revisions to
CBRSs are typically authorized by Congress based on State and local
requests as well as recommendations made by the U.S. Fish and Wildlife
Service. Because of the prohibition on the sale of flood insurance for
buildings constructed or substantially improved after the CBRS effective
date, it is critical to depict these areas on FIRMs. Thus, FEMA, in
cooperation with the U.S. Fish and Wildlife Service, transfers the
boundaries from Congressionally-adopted source maps, titled "Coastal
Barrier Resource System," to FIRMs so that insurance agents will not
inadvertently sell flood insurance policies for buildings not eligible
for the purchase of flood insurance.

## Map Modernization Program 

Nationwide, approximately 75 percent of the FEMA flood maps are more
than 10 years old. Because flood hazards are dynamic and usually
increase over time as development occurs, old maps tend to understate
actual, existing flood hazards. Additionally, most of the maps were
produced using now antiquated manual cartographic techniques. The
primary reason for the existing backlog of outdated maps has been
inadequate program funding over the past 20 years.

As a result, in 1997, FEMA designed a plan to modernize the FEMA
flood-mapping program. With implementation of the modernization plan,
the flood hazard information provided to communities would be more
accurate and extensive, resulting in safer communities. The plan
proposes a 7-year upgrade to the flood map inventory and an enhancement
of products, services, and process that entails:

-   Converting Level-1 Flood Map Upgrades that entail converting the
    maps to a digital format for approximately 11,140 communities
    (55,700 map panels)---this includes resolving community-identified
    map maintenance needs for 16,500 map panels; upgrading existing
    digitally produced 20,700 map panels to the new digital FIRM
    specifications; and when feasible, cost-effectively enhancing the
    flood theme (e.g., redelineation of floodplain boundaries on updated
    topography or limited detailed studies to update approximate flood
    zones).

-   Conducting Level-2 Flood Map Upgrades that entail all of the
    features of Level 1 Flood Map Upgrades plus incorporating updated
    detailed flood data through studies and restudies for approximately
    4,700 communities with inadequate floodplain mapping (23,540 map
    panels);

-   Flood map creations for approximately 2,700 flood-prone communities
    without flood maps (13,700 map panels);

-   Integrating communities, States, and regional agencies into the
    mapping process through the Cooperating Technical Partners (CTP)
    initiative;

-   Converting the maps to metric, as required by Executive Order 12770,
    and to the North American Vertical Datum of 1988; and

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-   Improving customer service to make the maps easier to obtain and
    use, including electronic and digital printing and distribution.

Over the proposed 7-year modernization period, the entire flood map
inventory would be converted to a digital format. Additionally,
approximately 13,700 new digital map panels would be created for
flood-prone communities that do not currently have flood maps.

As a cornerstone of the plan, FEMA continues to fully integrate
communities, States, and regional agencies in the flood mapping process
through the Cooperating Technical Partners (CTP) program. To date, more
than 115 partners have joined the CTP program, which includes two large
remapping efforts for the States of New York and North Carolina. The
program initiated for the State of North Carolina is the first statewide
flood mapping initiative and includes 16 other Federal agencies. The CTP
initiative allows partnering entities to perform all or portions of data
collection and mapping tasks. Cooperating Technical Partners can use the
*Guidelines and* *Specifications* *for Flood Hazard Mapping Partners* in
performing supporting technical analyses and preparation of flood hazard
maps.

To date, funding to implement the map modernization plan has not been
made available.

## Mapping Future Conditions 

Historically, flood hazard information presented on NFIP flood maps has
been based on the existing conditions of the floodplain and watershed.
The primary reason is that future land-use development, such as urban
growth, is uncertain and difficult to predict and has not, therefore,
been considered in FISs.

In recent years, a number of communities that are experiencing urban
growth have expressed interest in using hydrology based on future
conditions to regulate floodplain development. FEMA conducted an
extensive evaluation to determine whether future conditions flood hazard
information could and should be placed on FIRMs and in the accompanying
FIS. On November 27, 2001, FEMA issued a final rule that allows for
floodplains that reflect future conditions hydrology to be shown on the
FIRM at the request of the community.

The future conditions flood hazard information will be provided for
informational purposes only and it is up to the community to decide
whether to use the information to regulate floodplain development. When
future conditions floodplains are included on the FIRM, both the
existing conditions floodplain and the future conditions floodplain will
be shown. The existing conditions data will continue to be used to
establish flood insurance rates and to determine if flood insurance is
required. The new procedure will allow FEMA to maintain national
standards while at the same time providing additional information for
use by the community.

# Floodplain Management

Section 1315 of the 1968 Act prohibits FEMA from providing flood
insurance to property owners unless the community adopts and enforces
floodplain management criteria established under the authority of
Section 1361(c) of the Act. These criteria are established in the NFIP
regulations at 44 CFR §60.3. The community must adopt a floodplain
management ordinance that meets or exceeds the minimum NFIP criteria.
Under the NFIP, "community" is defined as:

> *"any State, or area or political subdivision thereof, or any Indian
> tribe or authorized*
>
> *tribal organization, or Alaska Native village or authorized native
> organization, which has authority to adopt and enforce floodplain
> management regulations for the areas within its jurisdiction."*

The Program has served as an important impetus for the establishment of
floodplain management programs nationwide in the approximately 19,700
participating communities and most States and territories. Community
participation in the NFIP is voluntary. Prior to the creation of the
NFIP, floodplain management as a practice was not well established --
only a few States and several hundred communities actually regulated
floodplain development. For many communities, the NFIP was the
community's initial exposure to land use planning and community
regulations. The power to regulate development in the floodplain,
including requiring and approving permits, inspecting property, and
citing violations, is granted to communities under a State's police
powers. FEMA has no direct involvement in the administration of local
floodplain management ordinances. Since the Federal Government does not
have land use authority, the NFIP is based on the Federal government's
power to spend under the Constitution rather than any Federal authority
to regulate land use.

## Minimum NFIP Floodplain Management Requirements 

Under the NFIP, the minimum floodplain management requirements that a
community must adopt depends on the type of flood risk data (detailed
FIS and FIRMs with BFEs or approximate A Zones and V Zones without BFEs)
that the community has been provided by FEMA. Under the NFIP
regulations, participating NFIP communities are required to regulate all
development in SFHAs. "Development" is defined as:

> *"any man-made change to improved or unimproved real estate, including
> but not limited to buildings or other structures, mining, dredging,
> filling, grading, paving, excavation or drilling operations or storage
> of equipment or materials."*

Before a property owner can undertake any development in the SFHA, a
permit must be obtained from the community. The community is responsible
for reviewing the proposed development to ensure that it complies with
the community's floodplain management ordinance. Communities are also
required to review proposed development in SFHAs to ensure that all
necessary permits have been received from those governmental agencies
from which approval is required by Federal or State law, such as 404
wetland permits from the Army Corps of Engineers or permits under the
Endangered Species Act.

Under the NFIP, communities must review subdivision proposals and other
proposed new development, including manufactured home parks or
subdivisions to ensure that these development proposals are reasonably
safe from flooding and that utilities and facilities servicing these
subdivisions or other development are constructed to minimize or
eliminate flood damage.

In general, the NFIP minimum floodplain management regulations require
that new construction or substantially improved or substantially damaged
existing buildings in A Zones must have their lowest floor (including
basement) elevated to or above the Base Flood Elevation (BFE).
Non-residential structures in A Zones can be either elevated or
dry-floodproofed. In V Zones, the building must be elevated on piles and
columns and the bottom of the lowest horizontal structural member of the
lowest floor of all new construction or substantially improved existing
buildings must be elevated to or above the BFE. The minimum floodplain
management requirements are further described below:

For all new and substantially improved buildings in A Zones:

-   All new construction and substantial improvements of residential
    buildings must have the lowest floor (including basement) elevated
    to or above the BFE.

-   All new construction and substantial improvements of non-residential
    buildings must either have the lowest floor (including basement)
    elevated to or above the BFE or dry-floodproofed to the BFE. Dry
    floodproofing means that the building must be designed and
    constructed to be watertight, substantially impermeable to
    floodwaters.

-   Buildings can be elevated to or above the BFE using fill, or they
    can be elevated on extended foundation walls or other enclosure
    walls, on piles, or on columns.

-   Because extended foundation or other enclosure walls will be exposed
    to flood forces, they must be designed and constructed to withstand
    hydrostatic pressure otherwise the walls can fail and the building
    can be damaged. The NFIP regulations require that foundation and
    enclosure walls that are subject to the 100-year flood be
    constructed with flood-resistant materials and contain openings that
    will permit the automatic entry and exit of floodwaters. These
    openings allow floodwaters to reach equal levels on both sides of
    the walls and thereby lessen the potential for damage. Any enclosed
    area below the BFE can only be used for the parking of vehicles,
    building access, or storage.

In addition, to the above requirements, communities are required to
select and adopt a regulatory floodway in riverine A Zones. The area
chosen for the regulatory floodway must be designed to carry the waters
of the 1-percent-annual-chance flood without increasing the water
surface elevation of that flood more than one foot at any point. Once
the floodway is designated, the community must prohibit development
within that floodway which would cause any increase in flood heights.
The floodway generally includes the river channel and adjacent
floodplain areas that often contain forests and wetlands, an area
estimated at 5.8 million acres (or over 9,000 square miles) on the
FIRMs. This requirement has the effect of limiting development in the
most hazardous and environmentally sensitive part of the floodplain.

For all new and substantially improved buildings in V Zones:

-   All new construction and substantial improvements of buildings must
    be elevated on piles and columns so that the bottom of the lowest
    horizontal structural member of the lowest floor is elevated to or
    above the BFE. No fill can be used for structural support.

-   All new construction and substantial improvements of buildings must
    be properly anchored to resist flotation, collapse, and lateral
    movement.

-   In V Zones, the velocity water and wave action associated with
    coastal flooding can exert strong hydrodynamic forces on any
    obstruction to the flow of water. Standard foundations such as solid
    masonry walls or wood-frame walls will obstruct flow and be at risk
    to damage from high-velocity flood forces. In addition, solid
    foundation walls can direct coastal floodwaters into the elevated
    portion of the building or into adjacent buildings. The result can
    be structural failure of the building. For these reasons, the area
    below the lowest floor of the elevated building in V Zones must
    either be free of obstruction, or any enclosure must be constructed
    with open wood lattice-panels or insect screening or, be constructed
    with non-supporting/non-load bearing breakaway walls which meet
    applicable NFIP criteria. Any enclosed area below the BFE can only
    be used for the parking of vehicles, building access, or storage.

-   In order to further protect structures from damaging wave impacts,
    structures must be located landward of the reach of mean high tide.
    Furthermore, man-made alteration of sand dunes and mangrove stands,
    which would increase potential flood damage, are prohibited within V
    Zones.

In responding to the public's desire to have an enclosed area below an
elevated building, but recognizing the potential risks to lives and
property, the NFIP floodplain management regulations permit certain
limited uses of enclosures below the lowest floor in A Zones or V Zones.
Under the NFIP, the enclosed area below an elevated building in an A
Zone or V Zone can only be used for the parking of vehicles, building
access, or storage. The allowance of these uses below the BFE is
permitted because the amount of damage caused by flooding to these areas
can easily be kept to a minimum by following the performance standards
for the design and construction of enclosures in A Zones and V Zones
described above and by using flood-resistant building materials. To
further minimize flood damages, mechanical, electrical, plumbing
equipment, and other service facilities must be designed and/or located
above the BFE so as to prevent damage during conditions of flooding.

The Program has led to a large reduction in potential average annual
flood damages for new construction (Post-FIRM structures). The NFIP's
loss experience indicates that \$1 billion in flood damages are avoided
each year as a result of the NFIP floodplain management regulations for
new construction. Structures built to NFIP criteria experience 80
percent less damage through reduced frequency and severity of losses.

On the other hand, there is still significant flood damage potential for
existing flood-prone buildings (Pre-FIRM structures). According to
estimates developed in a 1997 study, there are 6.6 million structures
located in SFHAs identified on the FIRMs. These 6.6 million structures
include 6.2 million residential structures (representing about 8 million
housing units) and 0.4 million non-residential structures. Of the 6.6
million structures, 4.3 million Pre-FIRM structures were built prior to
the issuance of a community's FIRM and the adoption of floodplain
management regulations. The problem is not with the total universe of
Pre-FIRM buildings. The 4.3 million Pre-FIRM structures have varying
degrees of flood risk with just over half of these structures estimated
to have their lowest floor below the BFE. Of those Pre-FIRM structures
that have their lowest floor below the BFE, a smaller group of Pre-FIRM
structures have their lowest floor well below the BFE and are subject to
the severest risk.

The NFIP substantial improvement requirement and substantial damage
requirement provides a mechanism to ensure that a significant increase
in investment in existing Pre-FIRM buildings will receive needed
protection from the flood risk. If a community determines that the cost
of improvements to a home or business equals or exceeds 50% of the
market value of the building, the building is considered a "substantial
improvement". If a community determines that the cost of restoring a
home or business equals or exceeds 50 of the market value of the
building before the damage from any origin occurred, the building is
considered \"substantially damaged\". A substantially improved building
or substantially damaged building must meet the minimum requirements of
the NFIP. It is the community's responsibility to make substantial
improvement or substantial damage determinations

The substantial damage requirement of the NFIP has been difficult for
some communities to enforce. One of the primary reasons for this has
been that local officials find it difficult to enforce the requirement
on property owners who do not have the financial resources to both
repair and bring the buildings into compliance. In the last ten years,
financial resources to mitigate substantially damaged buildings have
improved. With passage of the National Flood Insurance Reform Act of
1994, activities that support reducing future damages to existing
flood-prone buildings that have been substantially damaged now include:
Increased Cost of Compliance coverage and the Flood Mitigation
Assistance (FMA) program.

In addition, FEMA's Hazard Mitigation Grant Program (HMGP) under Section
404 of the Robert T. Stafford Disaster Relief and Emergency Relief Act
of 1988, as amended, also provides considerable resources in reducing or
eliminating future flood damages to existing structures after a flood
disaster. The Disaster Mitigation Act of 2000, which amended the
Stafford Act, will provide additional resources for mitigation projects
and planning. These activities are further described under "Other NFIP
Activities" below. FEMA's resources combined with resources from other
Federal agencies, such as the Department of Housing and Urban
Development and the Small Business Administration, have improved the
level of compliance with the substantial damage requirement by providing
property owners with the financial help they need to meet Program
requirements.

A number of the existing Pre-FIRM structures experience repeat flood
damages and represent a significant problem for the Program. NFIP
Repetitive Loss Properties have been generally defined as those that
have had at least two losses of \$1,000 or more within any 10-year
period. Currently there are about 45,000 insured repetitive loss
structures in the country. These buildings represent a serious drain on
the National Flood Insurance Fund and have accounted for nearly
one-third of all paid losses. The NFIP Regulations do not include
specific criteria to address repetitively damaged structures similar to
the substantial damage requirement. However, FEMA has developed a
Repetitive Loss Strategy to identify properties throughout the country
that are most at risk for repeat flooding, and to reduce their exposure
through targeted buyouts, relocation, and elevation. The strategy
targets a subset of Repetitive Loss Properties that includes currently
insured properties that have 2 or 3 losses where the cumulative flood
insurance claim payments are greater than the building value or those
properties that have had 4 or more losses. These represent around 10,000
buildings. FEMA's mitigation programs are being focused on these
buildings, which will result in significant reductions in NFIP claims
and overall flood damages as they are mitigated.

## Ordinance Adoption 

Once FEMA provides a community with the flood hazard information upon
which floodplain management regulations are based, the community is
required to adopt a floodplain management ordinance that meets or
exceeds the minimum NFIP requirements. FEMA can suspend communities from
the Program for failure to adopt once the community is notified of being
flood-prone or for failure to maintain a floodplain management ordinance
that meets or exceeds the minimum requirements of the NFIP. The
procedures for suspending a community from the Program for failure to
adopt or maintain a floodplain management ordinance that meets or
exceeds the minimum requirements of the NFIP are established in the NFIP
regulations at 44 CFR §59.24(a) and (d).

Since 1968, just over 2,300 communities have been suspended for failure
to adopt. Most of these communities subsequently adopted a compliant
ordinance and were eventually reinstated into the Program. A community
either has or does not have a compliant ordinance. There are currently
261 communities suspended from the Program for failure to adopt
floodplain management regulations that meet or exceed the minimum NFIP
requirements. These are generally small communities with little or no
floodplain development.

In these suspended communities, flood insurance is not available to
property owners. In addition, these communities are subject to
limitations on Federal financial assistance in Section 202(a) of 1973
Act which prohibits Federal officers or agencies from approving any form
of loan, grant, guaranty, insurance, payment, rebate, subsidy, disaster
assistance loan or grant, for acquisition or construction purposes
within SFHAs. For example, this would prohibit mortgage loans guaranteed
by the Department of Veterans Affairs, insured by the Federal Housing
Administration, or secured by the Rural Economic and Community
Development Services. In the case of disaster assistance under the
Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988,
as amended, this prohibition only applies to assistance in connection
with a flood.

Furthermore, Section 202(b) of the 1973 Act requires federally regulated
lending institutions to notify the purchaser or lessee of improved real
property situated in a SFHA whether Federal disaster assistance will be
available when such property is being used to secure a loan that is
being made, increased, extended or renewed.

## Monitoring Community Compliance 

FEMA monitors communities to ensure that they have adopted an ordinance
that meets or exceeds the minimum NFIP floodplain management criteria
and to ensure that they are effectively enforcing their ordinance. While
the NFIP floodplain management criteria are administered by States and
communities through their floodplain management regulations, FEMA's role
is to provide technical assistance and to monitor communities for
compliance with the minimum NFIP criteria. If communities do not
adequately enforce their floodplain management regulations, they can be
placed on probation and potentially suspended from the Program following
probation.

FEMA or States on behalf of FEMA conduct Community Assistance Visits
(CAVs) and Community Assistance Contacts (CACs) to monitor community
floodplain management programs. A CAV is a scheduled visit to an NFIP
community for the purpose of conducting a comprehensive assessment of
the community's floodplain management program. The CAV is also used as
an opportunity to provide technical assistance to the community. A CAV
typically involves a tour of the floodplain, a meeting with local
floodplain management officials, and an examination of the community's
floodplain development permit and variance files. The visit is
documented in a follow-up letter to the community. If any issues are
identified during the CAV, such as a possible floodplain violation or
program deficiency, these issues are also addressed in the follow-up
letter. The community is responsible for resolving any program
deficiencies or remedying any violations identified.

A CAC is used to establish a contact with a community for the purpose of
determining if any problems or issues exist and to offer the community
assistance if necessary. CACs can be conducted by means of a telephone
call or brief visit. While CACs are a less comprehensive assessment of a
community's floodplain management program, sufficient information about
the community's floodplain management program can be obtained in order
to determine whether there are more serious floodplain management
problems in the community.

Several thousand local officials are contacted annually through CAVs,
CACs, and other activities such as workshops and formal floodplain
management courses. Also, a number of local officials directly contact
State or FEMA regional staff for technical assistance. Because of
resource limitations in conducting CAVs and CACs in any given year, FEMA
has established criteria in prioritizing which communities will be
visited or contacted. Basically, a CAV should be conducted in
communities with known or suspected program deficiencies or potential
violations or communities experiencing development in the floodplain.
CACs are not conducted in communities where more serious floodplain
problems or issues are known or suspected. CACs are generally used as a
screening tool for determining whether a community should receive the
level of attention of a CAV. Together, they provide FEMA with an
effective means of monitoring participating communities and providing
technical assistance.

FEMA staff can also monitor enforcement by communities through
applications for flood insurance policies, which often identify
buildings that are potentially in violation of the NFIP minimum
floodplain management requirements. In addition, FEMA can monitor
enforcement by communities through the LOMR (Letter of Map Revision)
process. Requests through the LOMR process to remove land from the
floodplain designation based on fill may indicate that floodplain areas
have been improperly filled such as in a floodway or in a coastal V Zone
or that a building has its lowest floor below the BFE. The respective
FEMA regional office will follow-up with the community to determine
whether the building or floodplain development is in compliance with the
community's floodplain management regulations and may conduct a CAV if
warranted.

## Actions Against Communities For Failure to Enforce 

Most deficiencies in a community's floodplain management program or
violations of local ordinances are generally due to lack of
understanding of the NFIP requirements, lack of technical skills,
failure to understand the rationales behind the NFIP requirements, or
lack of an appreciation of the insurance implications and other
consequences of a decision. Most problems that are identified can be
solved through community assistance efforts. When this does not happen,
FEMA has procedures in place to conduct an enforcement action in order
to obtain compliance by the community. If a community does not
adequately enforce its floodplain management regulations, it can be
placed on probation or suspended from the Program.

Following a CAV, the community must be given reasonable time to
demonstrate buildings are compliant with the ordinance or it must
correct any program deficiencies and remedy any violations identified
during the visit. This affords the community the appropriate due
process. It also makes placing a community on probation, if necessary,
and potentially suspending a community legally defensible. As long as a
community is making adequate progress toward correcting program
deficiencies and remedying violations, FEMA will not initiate formal
probation. It is important that the community work toward resolving its
problems to ensure that future flood damages and potential loss of life
are mitigated. FEMA, however, will initiate probation in a community
that does not make sufficient progress in resolving its floodplain
management issues or chooses not to address them. The procedures for
placing a community on probation or suspending a community from the
Program are established in the NFIP regulations at 44 CFR §59.24(b) and
(c).

When it becomes necessary to initiate probation, FEMA notifies the
community that it will be placed on probation upon 120 days if the
community does not demonstrate it has corrected its program deficiencies
and has remedied violations to the maximum extent possible. While
probation has no effect on the availability of flood insurance, an
additional charge of \$50 is added to the premium for each policy for a
period of at least one year. A 120-day notice is provided to the
community so that FEMA can then give policyholders adequate notification
of the impending probation and the additional premium that will be
charged. According to the NFIP regulations, FEMA must provide
policyholders a notice at least 90 days before the probation is to
begin. During the 120-day period, the community has the opportunity to
avoid probation by demonstrating compliance with the NFIP requirements.

When a community is placed on probation, FEMA sends a letter to the
community establishing new compliance deadlines. If the community fails
to take remedial measures during the period of probation, the community
may be suspended from the NFIP. When a community is suspended from the
NFIP, flood insurance is no longer available. Also, the community is
subject to limitations on Federal financial assistance described above
under Ordinance Adoption.

As of July 23, 2002, there are 7 communities currently on probation
nationwide. Since 1986, 107 communities have been sent a formal notice
that they will be placed on probation if they do not address the program
deficiencies or violations identified. Out of the 107 communities, 51
have actually been placed on probation. The remaining communities
satisfactorily resolved their program deficiencies and violations before
being placed on probation. Nine communities were eventually suspended
from the Program for failure to enforce the community's floodplain
management ordinance and 4 of those communities are currently suspended
for noncompliance. The 5 remaining communities corrected their
deficiencies and were reinstated into the NFIP.

Most communities comply with NFIP requirements prior to FEMA's issuing a
probation notice. Communities often recognize that it is in everyone's
best interest to bring the community into compliance before probation or
suspension occurs. One of the primary reasons communities comply is to
avoid disruptions in the real estate market that would result with the
potential loss of flood insurance.

FEMA must follow its procedures for placing communities on probation or
suspending communities from the Program to ensure that adequate
notifications and due process are provided.

## Actions Against Individual Properties For Failure to Comply 

There are certain options that can be applied to individual structures
that are determined to be in violation of the community's floodplain
management ordinance. If an insured structure is identified as a
violation of the community's floodplain management ordinance, FEMA can
have the insurance company that insures the building review the
information and possibly rerate the structure to reflect the increased
risk to the structure. This can result in significantly higher flood
insurance rates on the structure, which may cause the property owner to
bring the building into compliance.

In addition, Section 1316 of the 1968 Act provides for the denial of
flood insurance coverage for any property which the Administrator of the
FIMA finds has been declared by a duly constituted State or community to
be in violation of State or community floodplain management regulations.
Section 1316 can only be implemented in instances when an appropriate
authority in the State or community submits a declaration to the
Administrator of the FIMA specifically stating that the structure is a
violation. Currently, there are over 500 structures that have been
denied flood insurance coverage under Section 1316.

## State Floodplain Management Role 

States also have a role in the NFIP and many have established State
floodplain management programs. Each State has designated an NFIP State
Coordinating Agency as a point of contact for the NFIP. Generally, the
State Coordinating Agency is the State environmental or natural
resources agency or the State emergency management agency. Most States
provide technical assistance to communities using FEMA funding under the
Community Assistance Program (CAP) -- State Support Services Element,
their own funding, or a combination of the two. CAP was developed in
recognition that there were not sufficient FEMA staff resources to
provide technical assistance to or monitor compliance with all the
participating NFIP communities (currently 19,700) and that other
resources would have to be used.

Many States have adopted floodplain management statutes and regulations
and have established and funded their own floodplain management
programs. States must also have floodplain management regulations or
executive orders in place that meet the minimum requirements of the NFIP
for State-owned properties in SFHAs. Where a State requires that
communities adopt more restrictive requirements than the NFIP minimum
requirements, such as a more restrictive floodway or additional
freeboard (requiring new construction to be elevated to a level 1 or
more feet higher than the BFE), the State requirements take precedence
over the NFIP minimum.

## Post-Disaster Assessments

The Federal Insurance and Mitigation Administration (FIMA) and the FEMA
Regional Offices conduct field investigations following major flood
disasters to evaluate how well the NFIP floodplain management
requirements performed. During these investigations, a team of experts
inspect disaster-induced damages to residential and commercial buildings
and other structures and infrastructure; conduct forensic engineering
analyses to determine causes of structural and building component
failures and successes; and evaluate local design practices,
construction methods and materials, building codes, and building
inspection and code enforcement processes. In addition, the teams make
recommendations of actions that State and local governments, the
construction industry, building code organizations, and individual
property owners can take to reduce future damages and to protect lives
and property in flood hazard areas.

Lessons learned by analyzing these building performance findings are
also used by FIMA to fine-tune and improve NFIP Floodplain Management
Regulations related to building performance, designs, methods, and
materials and to develop technical guidance. These assessments are
documented by FIMA in Flood Damage Assessment Reports and Building
Performance Assessment Team (BPAT) reports. The information and findings
in these reports are distributed widely using a variety of methods
including technical manuals, workshops, and the Internet, and through
formal training courses.

## Providing Technical Assistance 

In addition to technical assistance provided to communities as part of a
CAV or CAC, FEMA staff provides technical and planning assistance
through workshops and other contacts with community officials, property
owners, builders and developers, architects and engineers, surveyors,
lenders, and other NFIP constituents. Following major flood disasters,
FEMA staff work closely with communities in providing technical
assistance on the NFIP floodplain management requirements, particularly
the substantial damage requirement, and on developing a reconstruction
strategy for property impacted by floods to determine appropriate
mitigation measures, such as elevation, acquisition, or relocation of
flood-damaged structures.

FEMA conducts extensive training of local and State officials
responsible for administering floodplain management programs. FEMA
conducts a weeklong Resident Floodplain Management Course at FEMA's
Emergency Management Institute (EMI) several times a year. Through this
course, FEMA has trained over 1,000 State and local floodplain
management officials. An Independent Study Floodplain Management Course
is also offered through EMI. FEMA also offers Resident Courses at EMI on
mitigation, including a course on retrofitting flood-prone residential
structures and a course on coastal construction. The FEMA regional
offices and States deliver field-deployed versions of the EMI Floodplain
Management Course as well as conduct throughout the year a number of
floodplain management workshops that they develop.

Extensive publications have been produced on the NFIP, including
mitigation measures that can be undertaken to minimize or eliminate
future flood damages. Examples of these publications include:

-   *Homeowner's Guide to Retrofitting: Six Ways to Protect Your House
    from Flooding*

-   *Answers to Questions about Substantially Damaged Buildings*

-   *Guidance for State and Local Officials on Increased Cost of
    Compliance Coverage*

-   *Managing Floodplain Development in Approximate Zone A Areas*

-   *Coastal Construction Manual*

-   *Floodplain Management Bulletin 1-98 Use of Flood Insurance Study
    (FIA) Data as Available Data*

-   Technical Bulletin series on NFIP building criteria, such as TB
    1-93, *Openings in Foundation Wall* and TB 2-93 *Flood-Resistant
    Materials Requirements*. (Note: there are currently 11 Technical
    Bulletins published.)

A complete list of publications can be found on FEMA's website at
[www.FEMA.gov](http://www.FEMA.gov/).

FEMA and the American Planning Association (APA) jointly developed a
publication entitled *Subdivision Design in Flood Hazard Areas* that
encourages use of innovative planning tools to limit development in the
floodplain. This document was published in 1997 as part of their

Planning Advisory Service series in an effort to use APA's distribution
system to reach out to the planning community.

FEMA also promotes and coordinates governmental and non-governmental
floodplain management activities and is a consulting agency to other
Federal agencies on issues relating to implementation of Executive Order
(E.O.) 11988, Floodplain Management. E.O. 11988 establishes a
decision-making process for Federal agencies to avoid the long- and
short-term adverse impacts on floodplains unless no practicable
alternatives exist. If there is no practicable alternative, the Federal
agency must mitigate to ensure that the action minimizes any loss of
life and property and loss of natural and beneficial values.

# Flood Insurance

Section 1304 of the 1968 Act authorizes the Director of FEMA to
establish and carry out "*a national flood insurance program which will
enable interested persons to purchase insurance against loss resulting
from physical damage to or loss of real property or personal property*"
resulting from flood. Flood insurance provides the mechanism by which
floodplain occupants are compensated for flood damages. Flood insurance
also provides a way for some of the financial burden of flood losses to
be removed from taxpayers, such as for Federal disaster assistance and
casualty loss deductions under Federal income taxes.

The number of policies in force in the United States has increased from
about 95,000 before the Flood Disaster Protection Act of 1973, to 2.2
million in 1989, to over 4.3 million currently. Any property owner of
insurable property may purchase flood insurance coverage, provided that
the community in which the property is located is participating in the
NFIP. The amount of flood insurance coverage in force as of March 31,
2002 is over \$606 billion.

The National Flood Insurance Fund (NFIF) is the instrument through which
the Federal Government fulfills its financial responsibilities for the
NFIP. In fiscal year 2001, FIMA took in about \$1.5 billion in revenue,
mostly from insurance premiums and a \$30 Federal Policy fee on each
policy sold or renewed. Revenues from insurance premiums are used to pay
losses, pay interest to the Treasury, service the policies, and pay
Increased Cost of Compliance claims that provide financial resources for
protecting buildings from future flood damages. Revenue from the Federal
Policy Fee supports almost all the flood mapping and floodplain
management activities of the Program including the Flood Mitigation
Assistance program.

## Sale of Flood Insurance 

FEMA works closely with the insurance industry to facilitate the sale
and servicing of flood insurance policies. Flood insurance under the
NFIP is sold to owners of property located in NFIP communities through
two mechanisms: 1) through state-licensed property and casualty
insurance agents and brokers who deal directly with FEMA; and 2) through
private insurance companies with a program created in 1983 known as
"Write Your Own" (WYO).

The WYO Program was started to increase the NFIP policy count and
geographic distribution of policies by taking advantage of the private
insurance industry's marketing channels and existing policy base to sell
flood insurance. Eighty-six private insurance companies issue policies
and adjust flood claims in their own names under the NFIP. The insurers
receive an expense allowance and remit premium income in excess of this
allowance to the Federal Government. FEMA pays losses through a letter
of credit and sets the rates, coverage limitations, and eligibility
requirements. The premium charged for NFIP flood coverage by a WYO
Company is the same as that charged by the Federal Government through
the direct program. Currently about 95% of the flood policies issued
under the NFIP are written through the WYO Program.

The NFIP is not the only source of flood insurance. Businesses have been
able to purchase flood insurance under Difference In Conditions policies
from some insurance companies over the years. Flood coverage for
residential homeowners has been more difficult to acquire from the
private insurance market. The often-catastrophic nature of flooding has
kept most insurers, outside of the NFIP, from writing this coverage.
There are companies, such as Lloyds of London, that will, on a limited
basis, provide flood insurance to some properties.

## Flood Insurance Policy 

The Standard Flood Insurance Policy (SFIP) specifies the terms and
conditions of the agreement of insurance between FEMA or a WYO company
as the Insurer and the Insureds. Insureds in NFIP communities include
owners, renters, builders of buildings that are in the course of
construction, condominium associations, and owners of residential
condominium units.

\"Flood\" is defined in the SFIP, in part, as:

> "A general and temporary condition of partial or complete inundation
> of two or more acres of normally dry land area or of two or more
> properties (at least one of which is your property) from overflow of
> inland or tidal waters, from unusual and rapid accumulation or runoff
> of surface waters from any source, or from mudflow."

The SFIP is issued on one of three available policy forms, depending on
the occupancy of the building, to provide coverage for the peril of
flood.

-   The Dwelling Form is used to insure 1-4 family buildings and
    individual residential condominium units.

-   The General Property Form covers residential buildings of more than
    4 families as well as non-residential risks.

-   The Residential Condominium Building Association Policy (RCBAP) Form
    insures associations under the condominium form of ownership.

## Eligible Structures 

Sections 1305 of the 1968 Act establishes the scope of the flood
insurance program for eligible structures. As a priority, the 1968 Act
requires that flood insurance be made available to 1-4 family
residential buildings, small businesses, and churches. It gave
permission after study to extend flood insurance to other residential
properties, other business properties, agricultural properties,
properties occupied by private nonprofit organizations, and properties
owned by State or local governments. Currently insurance is available
for all these types of properties and their contents with limited
exceptions. Property owners in NFIP communities may purchase flood
insurance whether the building or its contents is located in or outside
the floodplain.

In order to be eligible for flood insurance, a structure must have at
least 2 solid walls and a roof, be principally above ground, and not
entirely over water. This includes manufactured (i.e., mobile) homes
that are anchored to permanent foundations and travel trailers without
wheels that are anchored to permanent foundations and are regulated
under the community\'s floodplain management and building ordinances or
laws. Contents of insurable walled and roofed buildings are insurable
under the policy as a separate coverage.

Buildings entirely over water or principally below ground, gas and
liquid storage tanks, animals, birds, fish, aircraft, wharves, piers,
bulkheads, growing crops, shrubbery, land, livestock, roads, machinery
or equipment in the open, and generally motor vehicles are
[not]{.underline} insurable. Most contents and finishing building
materials located in a basement are not covered. Similarly, this
coverage limitation applies to enclosures below the lowest elevated
floor of an elevated building constructed after the FIRM became
effective.

Section 1316 of the 1968 Act authorizes FIMA to deny flood insurance
*\"for any property which the Director finds has been declared by a duly
constituted state or local zoning authority, or other authorized public
body, to be in violation of a state or local laws, regulations, or
ordinances\"*. Section 1316 is initiated when an appropriate authority
in the State or community submits a declaration to the Administrator of
the FIMA specifically stating that the structure is a violation. When
the Administrator of the FIMA makes a finding of a valid declaration of
a violation, flood insurance is not available and no new policy can be
written to cover the building, nor can an existing policy be renewed.

## Coastal Barrier Resources System 

The purchase of flood insurance is also limited in the Coastal Barrier
Resources System. Congress passed laws limiting Federal expenditures in
certain coastal areas and designating them as a part of the Coastal
Barrier Resources System (CBRS) or as Otherwise Protected Areas (OPAs).
In these areas, there is a prohibition for the expenditure of most
Federal funds. These prohibitions refer to \"any form of loan, grant,
guarantee, insurance, payment, rebate, subsidy or any other form of
direct or indirect Federal assistance,\" with specific and limited
exceptions.

Older buildings constructed before dates established by the Coastal
Barrier Resources Act of 1982 and the Coastal Barrier Improvement Act of
1990 remain eligible for Federal flood insurance while new construction
or substantially improved structures located within these designated
areas are not eligible for flood insurance. If, at the time of a loss,
it is determined that a policy has been inadvertently issued on new
construction or substantial improvements located in a CBRS area, any
claim will be denied, the policy canceled, and the premium refunded. The
CBRS areas are located in nearly 400 communities on the Atlantic and
Gulf coasts and along the Great Lakes shores, and are delineated on the
communities\' flood maps and cover an estimated 3 million acres.

## Waiting Period 

Unlike other property insurance, agents who write policies under the
NFIP cannot "bind" coverage. A purchaser of flood insurance must wait 30
days from the date the application is completed and the premium
presented before the policy becomes effective. A change in the waiting
period from 5 days to 30 days was included as part of the National Flood
Insurance Reform Act of 1994. This addressed a problem encountered where
individuals with properties on larger rivers could wait until properties
many miles upriver were flooding before purchasing coverage.

There are however a several exceptions to the 30-day waiting period. For
example, the 30-day waiting period will not apply when a new flood
insurance policy is required in connection with the making, increasing,
extension, or renewal of a loan, such as a second mortgage. The 30-day
waiting period will not apply when an additional amount of insurance is
required during the 13-month period beginning on the effective date of a
map revision. Also, the 30-day waiting period

does not apply when a lender discovers that a loan that they have made
is in a SFHA and is required to carry flood insurance under the
Mandatory Flood Insurance Purchase Requirement.

## 

## Coverage Amounts 

Under the NFIP there are maximum amounts of coverage available under the
Emergency Program and the Regular Program. Under the Emergency Program,
non-actuarial, federally subsidized rates in limited amounts are
available prior to completion of a community's Flood Insurance Study
(FIS). Once more detailed risk data is provided to the community in the
form of a FIRM and a FIS, the community is entered into the Regular
Program and full limits of coverage are made available. Nearly all
participating communities are in the Regular Program, and individuals
can purchase flood insurance up to the following amounts.

-   Residential 1-4 family unit buildings and individual residential
    condominium units are written under the Dwelling Form and are
    eligible for up to \$250,000 in building coverage and up to
    \$100,000 in personal property coverage.

-   Residential buildings containing more than 4 units are eligible for
    up to \$250,000 in building coverage and up to \$100,000 on personal
    property.

-   Non-residential buildings are eligible for up to \$500,000 in
    building coverage and up to \$500,000 on personal property written
    on the General Property Form.

-   Under the RCBAP Form a condominium association can purchase coverage
    on a building, which includes all the units within the building and
    the improvements within the units, up to \$250,000 times the number
    of units within the residential building. Personal property coverage
    on the form is limited to \$100,000 per building.

The average amount of insurance coverage purchased under the NFIP is
\$131,670, which includes coverage for the building and its contents.

## Other Coverages 

In addition to providing coverage for Building and Personal Property,
the SFIP also provides Other Coverage for Debris Removal, Loss Avoidance
Measures, and, under the Dwelling Form, coverage for Condominium Loss
Assessments if the policy insures a condominium unit. The SFIP includes
coverage for Pollution Damage if the damage results from a flood. All of
these coverages are provided within the purchased policy limits.

All three policy forms provide Increased Cost of Compliance (ICC)
coverage. ICC coverage provides for the payment of a claim to help pay
for the increased costs to comply with State or community floodplain
management laws or ordinances after a flood in which a building has been
declared substantially damaged or repetitively damaged. When an insured
building is damaged by a flood and the community declares the building
to be substantially or repetitively damaged, thus triggering the
requirement to comply with a community floodplain management ordinance,
ICC will help pay for the cost to elevate, relocate, demolish, or
floodproof (non-residential buildings only) up to a maximum of \$20,000.
This coverage is in addition to the building coverage for the repair of
actual physical damages from flood under the SFIP, but the total paid
cannot exceed the maximum limit set by Congress for that type of
building.

The maximum limit of \$20,000 will help property owners insured under
the NFIP to pay for a portion or, in some cases, all of the costs of
undertaking actions to protect homes and businesses from flood losses.
In addition, an ICC claim payment can be used to complement and
supplement funds under other mitigation programs such as the Flood
Mitigation Assistance program and FEMA's Hazard Mitigation Grant Program
to assist communities in implementing measures to reduce or eliminate
the long-term risk of flood damage to buildings insured under the NFIP.
As of November 30, 2001, approximately 689 claims have been paid under
the ICC coverage to elevate, relocate, demolish, or floodproof
structures for just over \$7.5 million.

## Ratemaking 

The 1968 Act separated the flood insurance ratemaking process into two
distinct categories: subsidized rates and actuarial rates. Congress
authorized the NFIP to offer policies at subsidized rates (at less than
full actuarial risk rates) to existing buildings constructed on or
before December 31, 1974 or before the effective date of the initial
FIRM, whichever is later. Congress concluded that these buildings were
built without the occupants' full knowledge and understanding of the
flood risk, and to rate them using the actuarial rates might make the
flood insurance prohibitively expensive. FEMA estimates that risks in
this class are paying on average only 35 to 40 percent of what the full
risk premium should be to fund the long-term expectation of the flood
losses to the building. Only such general rating factors as flood-risk
zone, occupancy type, and building type are used to rate these buildings
for flood insurance. Even though premiums for policies on existing
buildings are subsidized, floodplain occupants pay for at least part of
the cost of the insurance and no longer need most disaster assistance.
(Note: Subsidized premiums mean that the insured is paying less than
their full-risk premium. The difference between this full-risk premium
and the amounts the insured pays is revenue that is foregone by the
NFIP. There is no annual transfer from general taxpayer revenue.)

In exchange for this subsidized insurance, participating communities
must require new construction and substantially improved structures to
meet the minimum requirements of the NFIP. The 1968 Act requires that
FEMA charge full actuarial rates reflecting the complete flood risk to
buildings constructed or substantially improved on or after the
effective date of the initial FIRM for the community or after December
31, 1974, whichever is later. Once FEMA identifies the flood risk and
makes the information available to communities, actuarial rating assures
that those located in such areas bear the full risks associated with
buildings in flood-prone areas. The flood insurance rates take into
account a number of different factors including the flood-risk zone
shown on the FIRM, the elevation of the lowest floor above or below the
BFE, the type of building, the number of floors, and the existence of a
basement or an enclosure.

The flood-risk zone and the BFE are specific factors that can
differentiate the flood risk in various areas of the country. For
example, FEMA designates certain shallow flooding areas as AO and AH
zones and some riverine areas as A and AE zones. FEMA designates areas
subject to damage by waves and storm surge as V and VE zones and usually
designates coastal areas landward of the V zone as A and AE zones. This
difference reflects both the lower expectation of loss and our actual
loss experience for these zones.

While FEMA prints rate tables showing all possible flood risk zones and
uses them for the entire country, FEMA does not show the same zones on
every FIRM. For example, communities in Utah or Kansas do not have V
zones because they are not subject to wave action and storm surge.
However, where the same zone designation is used in two different areas
of the country, it is because our engineering studies have shown that
the degree of risk is very similar. Policyholders in AE and VE zones in
one State are paying the same rates as policyholders in another State,
if the lowest floor elevation of buildings is the same in relation to
the BFE. This is because their risk of flooding is statistically the
same.

The insurance aspects of the NFIP have important implications for
floodplain management. Buildings that comply with community floodplain
management regulations pay premiums based on flood insurance rates that
are in most cases significantly lower than the subsidized rates charged
Pre-FIRM buildings. However, buildings constructed in violation of the
community's floodplain management ordinance pay much higher rates, which
can be thousands of dollars a year for buildings substantially below the
required elevations. FEMA bases the flood insurance rates for Post-FIRM
structures on a building's exposure to flood damage. Based on our loss
experience on older structures built before establishment of NFIP
minimum floodplain management requirements, FEMA can generally expect
that they will suffer as much as 5 times the flood damage that compliant
new structures experience. New buildings with non-compliant ground level
enclosures in coastal areas can actually represent risks that are at
least as poor as the average older Pre-FIRM buildings.

## 

## Claims 

Claims under the NFIP require, as in other insurance, that the insured
file a Proof of Loss. This must be submitted within 60 days of the loss,
unless waived by the Administrator of the FIMA. Claims can be adjusted
using either an independent adjuster or an adjuster employed by a WYO
company. Under all NFIP policies, the insured pays a portion of the loss
through the application of a deductible. In FY 2001, the NFIP paid
43,525 claims with an average claim payment of \$26,079.

The largest loss payout from a single flood event occurred in June 2001
as a result of Tropical Storm Allison, the NFIP's first "billion dollar
storm". The second largest flood event in dollars paid was in Louisiana
in May 1995 with payments totaling \$583,952,604 and the third largest
flood event in dollars paid resulted from Hurricane Floyd in September
1999 with payments totaling \$433,384,943.

The long-term goal of the NFIP is to be actuarially sound, including
consideration for potential catastrophic loss years. In the near term,
in establishing a fiscally sound program, the NFIP overall is intended
to generate premium at least sufficient to cover expenses and losses
relative to what is called the "historical average loss year". Since the
NFIP's underwriting experience does not include truly catastrophic loss
years, the historical average is less than the true long-term average.
However, the premium income to the program is made up of two distinct
pieces -- Pre-FIRM polices charged less than full-risk premiums and
Post-FIRM (and other) policies charged full-risk premiums including
catastrophic loss considerations.

The NFIP's historical average loss year is approximately \$700 million
in loss payments. At this level, FIMA can maintain a Program that is
self-supporting for that year. The NFIP has not been capitalized, but
generates surplus during less-than-average-loss years and has borrowing
authority with the U.S. Treasury to cover losses in the event that
policyholder funds and investment income are inadequate. It does not use
taxpayer funds to pay claims, operating expenses, or offset any
shortfalls in premium from policies paying a subsidized flood insurance
rate. Having twenty-six percent of policyholders paying significantly
less than full-risk premiums impedes the ability to generate surplus or
to repay borrowed funds, which depends on levels of annual losses that
are highly variable.

However, the possibility of borrowing funds from the Treasury would be
present even if all NFIP policyholders paid full-risk premiums should a
catastrophic or a series of catastrophic flood events occur. When the
NFIP borrows money, it pays the Treasury back with interest. The NFIP
paid off the Treasury debt in June 2001 from a high of \$922 million in
1999. However, because of the extent of the flooding from Tropical Storm
Allison in Texas and Louisiana resulting in over 30,000 claims, FEMA had
to borrow funds from the Treasury.

Since 1969, the NFIP has paid \$11.9 billion in losses that would
otherwise have been paid by taxpayers through disaster assistance or
borne by home and business owners themselves. Moreover, NFIP floodplain
management and hazard identification activities have significantly
reduced the frequency and severity of flood damages to buildings built
in compliance with NFIP standards. Structures built to NFIP criteria
experience 80% less damage through reduced frequency and severity of
losses. The NFIP floodplain management requirements are estimated to
save \$1 billion per year.

## 

## Marketing 

Today, many Americans are either unaware that flood damage is not
covered by their homeowner's insurance policy or they are in denial
about the serious flood risks to which they are exposed. Definitive
figures on the potential market for flood insurance are difficult to
obtain. A conservative estimate is that only one-third to one-half of
those in SFHAs have coverage. For a number of flood disasters in the
past few years, only 10-20% of the victims in SFHAs had flood insurance
coverage. The remaining 80-90% must rely on taxpayer-funded Federal
disaster assistance, which is very limited, loans which must be paid
back, tax write-offs, or savings to help them recover.

The insurance industry, which has been the major mechanism for the sale
of flood insurance since the Program's inception, has repeatedly stated
that the key to selling flood insurance is public awareness on a
national scale. Working with them, FEMA has designed and continues to
refine flood insurance advertising and promotional activities to educate
consumers, heighten awareness, and make the insurance agent's job
easier.

FEMA's strategy for increasing the number of Americans insured against
flood damage includes:

-   Financial incentives for WYO insurance companies to increase and
    retain policyholders.

-   Cover America II---a public awareness and education campaign
    primarily targeting consumers to stimulate interest in buying flood
    insurance. (The campaign also reaches insurance agents and lenders,
    encouraging their active involvement in flood insurance.)

-   Facilitating lender compliance with statutory flood insurance
    requirements through training, guidance materials, and regular
    communication with lending regulators, government sponsored
    enterprises, and lender trade associations.

-   NFIP training for insurance agents via live seminars and on-line
    training modules.

-   Simplifying NFIP processes to make it easier for agents to sell and
    consumers to buy.

-   Improving retention of policies.

# Mandatory Flood Insurance Purchase Requirement

From 1968 until the adoption of the Flood Disaster Protection Act of
1973, the purchase of flood insurance was voluntary. Property owners
could make their own decision whether to purchase flood insurance.
Unfortunately, the response nationwide to purchasing flood insurance
voluntarily was less then enthusiastic. Just over 95,000 policies were
in force in 1972, and very few victims from Tropical Storm Agnes that
hit that same year had flood insurance.

The 1973 Act mandated flood insurance coverage for many properties. For
the first time, regulated lending institutions could not make, increase,
extend, or renew any loan secured by improved real estate located in a
SFHA in a participating NFIP community unless the secured building and
any personal property securing the loan were covered for the life of the
loan by flood insurance. Congress established this requirement because,
after major flood disasters, it

became evident that relatively few individuals in eligible communities
who sustained flood damage had purchased flood insurance.

Also, Federal officers or agencies could not approve any form of loan,
grant, guaranty, insurance, payment, rebate, subsidy, disaster
assistance loan or grant, for acquisition or construction purposes
within a SFHA in a participating community unless the building and any
personal property to which such financial assistance relates were
covered during the life of the property.

The Housing and Community Development Act of 1977, which amended section
202(b) of the 1973 Act, permitted regulated lending institutions to make
conventional loans in a SFHA of a non-participating community. It
required them to notify the purchaser or lessee of improved property
situated in a SFHA of a non-participating community and used to secure a
loan being made, increased, extended, or renewed, whether Federal
disaster assistance for flood damage will be available.

Furthermore, Section 202(a) of the 1973 Act prohibits Federal officers
or agencies from approving any form of loan, grant, guaranty, insurance,
payment, rebate, subsidy, disaster assistance loan or grant, for
acquisition or construction purposes within SFHAs of non-participating
communities. For example, this would prohibit mortgage loans guaranteed
by the Department of Veterans Affairs, insured by the Federal Housing
Administration, or secured by the Rural Economic and Community
Development Services. In the case of disaster assistance under the
Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988,
as amended, this prohibition only applies to assistance in connection
with a flood.

Following the multi-billion dollar flood disaster in the Midwest in
1993, Congress enacted the National Flood Insurance Reform Act of 1994.
One of the purposes of the 1994 Act is to improve compliance with the
mandatory purchase requirements of the NFIP by lenders, servicers, and
secondary-market purchasers. Congress was concerned over the low level
of insurance participation among eligible property owners and resulting
increases in Federal disaster relief payments. While FEMA administers
the NFIP, it has no responsibility or authority under either the 1973
Act or 1994 Act with respect to lender compliance with the Mandatory
Flood Insurance Purchase Requirement -- this responsibility falls on the
Federal agency lender regulators and secondary-market purchasers though
FEMA prepares guidance materials with respect to the NFIP and the
Mandatory Flood Insurance Purchase Requirement.

The law requires Federal agency lender regulators to develop regulations
to direct their federally regulated lenders not to make, increase,
extend, or renew any loan on applicable property unless flood insurance
is purchased and maintained. The law also addresses the responsibility
of regulated lending institutions and Government-Sponsored Enterprises
(GSEs) (i.e., Fannie Mae and Freddie Mac) in providing a notice of and
requiring flood insurance coverage for the term of the loan on buildings
located in any SFHA in participating NFIP communities.

The 1994 Act significantly tightens the 1973 Act by imposing important
new obligations on both mortgage originators and servicers, including
mandatory escrow requirements for flood insurance and mandatory
provisions for "forced placement" of insurance. Specifically, the 1994
Act requires the force placement of flood insurance if a lender or
servicer determines that the building securing the loan is not
adequately insured. Also, the 1994 Act grants statutory authority to a
lender or servicer to purchase flood insurance for the building and
charge a premium to the borrower if the building is in an SFHA. In
addition, Congress designated for the first time in the 1994 Act a
specific range of regulatory civil monetary penalties that may be
imposed administratively when it is found that a "pattern or practice of
committing violations" has occurred by regulated lenders.

It is the responsibility of the lender to:

-   Determine whether the building offered as security for a loan is, or
    will be located in an SFHA;

-   Document the determination using the Standard Flood Hazard
    Determination Form;

-   Require flood insurance to the appropriate amount when necessary;

-   Ensure that flood insurance is maintained during the life of the
    loan; and

-   Ensure that flood insurance is purchased and maintained if the
    lender becomes aware that the building involved subsequently is
    located in an area that has been remapped as a SFHA.

Although the intent of the 1994 Act is to require borrowers to purchase
flood insurance, the Act's directives and prohibitions are directed to
federally-regulated primary lenders and to secondary market entities
involved in mortgage loan transactions. The flood insurance requirement
does not apply to lenders or servicers that are not federally regulated
or do not sell loans to GSEs such as Fannie Mae and Freddie Mac or other
GSEs.

It is a prerequisite that a designated loan have flood insurance as a
condition of closing. If a borrower will not voluntarily obtain coverage
and a lender is unable to force place coverage, the lender must deny the
loan or exercise the sanction provisions of the loan document if the
loan already has been made. A lender cannot accept a borrower's
assurance that he or she will obtain insurance coverage in the future or
grant the lender indemnity while seeking coverage. Closing a designated
loan without flood insurance coverage in place constitutes a violation
of the regulation implementing the Mandatory Purchase Requirement.

Lenders on their own initiative may require the purchase of flood
insurance even if a structure is located outside the SFHA. A decision to
require coverage under such circumstance is not compelled by statute.
Lenders have this prerogative to require flood insurance to protect
their investments.

# Other NFIP Activities

## Community Rating System

The NFIP's Community Rating System (CRS) provides discounts on flood
insurance premiums in those communities that establish floodplain
management programs that go beyond NFIP minimum requirements. Under the
CRS, communities receive credit for more restrictive regulations,
acquisition, relocation, or floodproofing of flood-prone buildings,
preservation of open space, and other measures that reduce flood damages
or protect the natural resources and functions of floodplains.

The CRS was implemented in 1990 to recognize and encourage community
floodplain management activities that exceed the minimum NFIP standards.
Section 541 of the 1994 Act amends Section 1315 of the 1968 Act to
codify the Community Rating System in the NFIP, and to expand the CRS
goals to specifically include incentives for reducing the risk of
flood-related erosion and for encouraging measures that protect natural
and beneficial floodplain functions. These goals have been incorporated
into the CRS and communities now receive credit towards premium
reductions for activities that contribute to them.

Under the CRS, flood insurance premium rates are adjusted to reflect the
reduced flood risk resulting from community activities that meet the
three goals of the CRS:

(1) Reduce flood losses, i.e.,

    -   Protect public health and safety,

    -   Reduce damage to property,

    -   Prevent increases in flood damage from new construction,

    -   Reduce the risk of erosion damage, and

    -   Protect natural and beneficial floodplain functions;

(2) Facilitate accurate insurance rating; and

(3) Promote the awareness of flood insurance.

There are 10 CRS classes: Class 1 requires the most credit points and
gives the largest premium reduction; Class 10 receives no premium
reduction. CRS premium discounts on flood insurance range from 5 percent
for Class 9 communities up to 45 percent for Class 1 communities. The
CRS recognizes 18 creditable activities, organized under four
categories: Public Information, Mapping and Regulations, Flood Damage
Reduction, and Flood Preparedness.

For example, credits are provided for use of future conditions hydrology
and more restrictive floodway standards, prohibiting fill in the
floodway, and adopting compensatory storage regulations, innovative land
development criteria, stormwater management regulations, other higher
regulatory standards, and local floodplain management plans. Credits are
also provided in the CRS for preserving open space in their natural
state and for low-density zoning and for acquiring and clearing
buildings from the floodplain and returning the area to open space. The
2002 *CRS Coordinator's Manual* includes a new section, "Land
Development Criteria," which specifically credits community land
development regulations that limit development in the floodplain or
provide incentives to limit floodplain development. Communities receive
credits for adopting smart growth land development criteria and for
creating open space through their land development process.

There are now over 900 communities receiving flood insurance premium
discounts based on their implementation of local mitigation, outreach,
and educational activities that go well beyond minimum NFIP
requirements. Although premium discounts are one of the benefits of
participation in the CRS, these communities are carrying out important
activities that save lives, reduce property damage, and protect the
natural and beneficial functions of floodplains. These 900-plus
communities represent a significant portion of the nation's flood risk
as evidenced by the fact that they account for over 66% of the NFIP's
policy base. Communities receiving premium discounts through the CRS
cover a full range of sizes from small to large, and a broad mixture of
flood risks, including coastal and riverine.

The CRS -- its development and implementation -- has benefited from the
advice and effort of Federal, State, and local officials, professionals
with expertise in floodplain management and insurance, and academics. A
multidisciplinary approach led to successful implementation of the
program and this same approach has been employed in reviewing and
refining the CRS over the last 10 years.

## Flood Mitigation Assistance Program 

The Flood Mitigation Assistance (FMA) program provides funding to assist
States and communities to accomplish flood mitigation planning and
implement measures to reduce future flood damages to structures. This
program is authorized under the 1994 Act. These funds can be used before
disaster strikes.

The FMA program provides funding up to \$20 million a year with a 75/25
cost share. Examples of eligible activities for planning grants include
conducting local planning meetings to obtain citizen input; contracting
for engineering or planning technical assistance; surveying structures
at risk of flooding; and assessing repetitive losses. Only projects for
mitigation activities specified in an approved Flood Mitigation Plan are
eligible for project grants. For example, a community may determine in
its plan that acquisition of structures would be the preferred
alternative for floodway areas, while elevation may be more appropriate
solution in other areas of the floodplain.

The purpose of FMA project grants is to assist States and communities in
implementing flood mitigation projects to reduce the risk of flood
damage to NFIP-insurable structures. Examples of eligible types of
projects include:

-   Elevation of NFIP-insured residential structures and elevation or
    dry-floodproofing of non-residential structures in accordance with
    44 CFR §60.3.

-   Acquisition of NFIP-insured structures and underlying real property.

-   Relocation of NFIP-insured structures from acquired or restricted
    real property to sites not prone to flood hazards.

-   Demolition of NFIP-insured structures on acquired or restricted real
    property.

-   Beach nourishment activities that focus on facilitating natural dune
    replenishment through the planting of native dune vegetation and/or
    the installation of sand fencing. Placement of sand on beach is not
    eligible.

-   Minor physical flood control projects that do not duplicate the
    flood-prevention activities of other Federal agencies that address
    localized flood problem areas such as stabilization of stream banks,
    modification of existing culverts, creation of small stormwater
    retention basins. Major structural flood control structures, such as
    levees, dams, and seawalls are not eligible.

To be eligible for funding, a project must be:

-   Cost-effective;

-   Conform with applicable Federal and State regulations and executive
    orders;

-   Be technically feasible;

-   Conform with the Flood Mitigation Plan; and

-   Be located physically in a participating NFIP community that is not
    on probation.

The 1994 Act directs FEMA to "make every effort to provide mitigation
assistance for mitigation plans proposing activities for repetitive loss
structures and structures that have incurred substantial damage." FEMA
is focusing the FMA program on repetitive loss properties. The NFIP's
Repetitive Loss Strategy is to identify properties throughout the
country that are most at risk for repeat flooding, and to reduce their
exposure through targeted buyouts, relocation, and elevation.
Approximately 45,638 repetitive loss properties are currently insured.
These buildings are projected to cost the program \$200 million per year
in claims. New repetitive loss properties continue to emerge each year.
FEMA has identified target buildings that are currently insured and have
the greatest risk. There are 8,753 buildings with four or more losses,
and l,160 buildings with two or three loses that exceed building value.
Most of these target buildings are single-family residences. The limited
FMA program funds (\$20 million) are a key resource toward achieving
this goal.

For projects that directly affect individual structures, such as
elevation, acquisition, or relocation, each structure must have a flood
insurance policy in force. FMA will be available to States and
communities for mitigation activities that may benefit insurable
properties not insured under the NFIP. For minor structural flood
control projects, the effectiveness of the project can be based on
benefits provided to insurable structures not insured under the NFIP.

Since 1996, FMA program funds have been used to acquire 484 flood-prone
structures, relocate 16 flood-prone structures, elevate 491 flood-prone
structures, and dry-floodproofed 8 flood-prone non-residential
structures. To date, FEMA has allocated through FMA \$97.6 million for
projects; \$9 million for plans; and \$10.8 million for technical
assistance.

The predecessor to the FMA program was Section 1362 of the 1968 Act,
which was also intended to address existing flood-prone structures. This
provision authorized the NFIP to purchase certain insured properties
that had been either substantially or repetitively damaged and transfer
the land to a public agency for open space. Funds were appropriated for
Section 1362 annually from 1980 until 1994, when the FMA program
replaced the Section 1362 program. Over the period during which funds
were available, approximately 1,400 properties were purchased at a total
cost of about \$51.9 million.

# Other FEMA Programs

The following are other FEMA programs and activities that provide
mitigation assistance and planning assistance in reducing the Nation's
flood losses.

## Hazard Mitigation Grant Program 

The Hazard Mitigation Grant Program (HMGP) was created in 1988 by
Section 404 of the Robert T. Stafford Disaster Relief and Emergency
Assistance Act, as amended (amendments include the Hazard Mitigation and
Relocation Assistance Act of 1993 and the Disaster Mitigation Act of
2000). The HMGP assists States and communities in implementing long-term
hazard mitigation measures for all hazard types following a major
disaster declaration. A key purpose of the HMGP is to ensure that the
opportunity to take critical mitigation measures to

protect life and property from future disasters is not lost during
recovery and reconstruction process following a disaster.

HMGP funds are made available based on 15% of the estimated Federal
funds to be spent on the Public and Individual Assistance programs
(minus administrative expenses) for each disaster. States whose
mitigation planning process meets enhanced criteria will be able to
receive 20% funding under the regulations implementing the Disaster
Mitigation Act of 2000. As of September 2001, 5,560 projects have been
approved at a total Federal expenditure of approximately \$2.6 billion.

Eligible mitigation measures under the HMGP include acquisition or
relocation of flood-prone structures, elevation of flood-prone
structures, seismic rehabilitation of existing structures, and
strengthening of existing structures against wildfire. Additionally, up
to seven percent of the HMGP funds may be used to develop State and/or
local mitigation plans.

The State, as grantee, is responsible for administering the HMGP.
Communities develop HMGP project applications and apply for funds
through the State. The State notifies potential applicants of the
availability of funding, defines a project selection process, ranks and
prioritizes projects for funding, and forwards projects to FEMA for
approval. The applicant, or subgrantee, carries out approved projects.
The State or local government must provide a 25 percent match, which can
be from a combination of cash and in-kind sources.

In response to flood hazards, FEMA's primary emphasis is on
nonstructural hazard mitigation measures. Nonstructural measures include
the acquisition and demolition, relocation, elevation, or floodproofing
of flood-damaged or flood-prone properties.

Since the program's inception to September 2001, FEMA has permanently
eliminated or significantly reduced future flood damages for over 25,801
at-risk structures through nonstructural measures as follows:
acquisition of 22,564 properties; relocation of 733 properties; and
elevation of 2,504 properties. The total Federal expenditure for these
measures was \$826,943,785.

## Disaster Mitigation Act of 2000 

The Disaster Mitigation Act (DMA) of 2000 amended the Robert T. Stafford
Disaster Relief and Emergency Assistance Act of 1988. The DMA authorizes
the creation of a pre-disaster mitigation program to make grants to
State, local and tribal governments. It also includes a provision that
defines mitigation planning requirements for State, local and tribal
governments. This new section (Section 322) establishes a new
requirement for local and tribal mitigation plans; authorizes up to 7
percent of the HMGP funds available to a State to be used for
development of State, local and tribal mitigation plans; and provides
for States to receive an increased percentage of HMGP funds from 15
percent to 20 percent if, at the time of the disaster declaration, the
State has in effect a FEMA approved State Mitigation Plan that meets the
criteria established in regulations.

## Planning Initiatives 

In addition to providing pre-and post-disaster planning assistance to
States and communities, FEMA has undertaken a number of other
initiatives to encourage communities to undertake mitigation planning
and to incorporate natural hazards into their comprehensive land use
planning. FEMA and the American Planning Association (APA) jointly
developed a publication entitled *Planning for Post-Disaster Recovery
and Reconstruction* that encourages use of planning tools to guide the
rebuilding process for a safer and more sustainable community. This
document was published in 1998 as part of their Planning Advisory
Service series in an effort to use APA's distribution system to reach
out to the planning community.

FEMA also participated in and provided financial support to HUD's
*Growing Smart* initiative working with APA to develop a natural hazards
element for a local comprehensive or general plan. FEMA has prepared a
publication on "sustainability," *Planning for a Sustainable Future, The
Link Between Hazard Mitigation and Livability. A* series of "how-to"
manuals on natural hazards planning is being developed for publication
in Fall 2002. One of the "how-to" manuals, *Understanding Your Risks:
Identifying Hazards and Estimating Losses*, was published in August
2001. FEMA expects to encourage State and community planning through the
new pre-disaster mitigation provisions of Disaster Mitigation Act of
2000. Information on mitigation planning programs and guidance can be
found at
[www.fema.gov/fima/planning.shtm](http://www.fema.gov/fima/planning.shtm).

# A Key To The Acronyms Used In This Document 

APA - American Planning Association

BFE - Base Flood Elevation

BPAT - Building Performance Assessment Team

CAC - Community Assistance Contact

CAP - Community Assistance Program

CAV - Community Assistance Visit

CBRS - Coastal Barrier Resources System

CFR - Code of Federal Regulations

CRS - Community Rating System

CTP - Cooperative Technical Partners

DFIRM - Digital Flood Insurance Rate Map

DMA - Disaster Mitigation Act of 2000

EMI - Emergency Management Institute

E.O. - Executive Order

FEMA - Federal Emergency Management Agency

FIA - Federal Insurance Administration

FIMA - Federal Insurance and Mitigation Administration

FIRM - Flood Insurance Rate Map

FIS - Flood Insurance Study

FMA - Flood Mitigation Assistance program

GSE - Government-Sponsored Enterprise

HMGP - Hazard Mitigation Grant Program

HUD - Housing and Urban Development (Department of)

ICC - Increased Cost of Compliance

LOMA - Letter of Map Amendment

LOMR - Letter of Map Revision

LOMR-F- Letter of Map Revision based on Fill

NFIP - National Flood Insurance Fund

NFIP - National Flood Insurance Program

NFIRA - National Flood Insurance Reform Act

OMB - Office of Management and Budget

RCBAP - Residential Condominium Building Association Policy

OPAs - Otherwise Protected Areas

SFHA - Special Flood Hazard Area

SFIP - Standard Flood Insurance Policy

TB - Technical Bulletin

WYO - Write-Your-Own