**GAO-09-20**                      Published: Nov 14, 2008. Publicly Released: Dec 16, 2008.                  

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## Highlights

The Federal Emergency Management Agency (FEMA), the Department of Homeland Security (DHS) agency that administers the National Flood Insurance Program (NFIP), estimates that subsidized properties--those that receive discounted premium rates that do not fully reflect the properties' actual flood risk--experience as much as five times the flood damage as properties that do not qualify for subsidized rates. Almost one in every four residential policies has subsidized rates that are on average 35-40 percent of the full-risk rate. Unprecedented losses from the 2005 hurricane season and NFIP's periodic need to borrow from the Department of the Treasury to pay flood insurance claims has raised concerns about the impact that subsidized premium rates have on the longterm financial solvency of NFIP. GAO designated NFIP as high-risk in March 2006; as of June 2008, NFIP's debt stood at $17.4 billion. This report (1) provides information on NFIP's inventory of subsidized properties and (2) examines NFIP's current approach to subsidized properties and the advantages and disadvantages of options for reducing the costs associated with these properties. To do this work, GAO analyzed data on policies and claims and collected available data about subsidized properties. GAO also reviewed applicable reports and interviewed relevant agency, state, and private sector officials. In its written comments, DHS expounded upon several topics discussed in this report.

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## Topics

Economic Development

ClaimsClaims settlementCost analysisDisaster planningDisaster recoveryDisaster relief aidFinancial managementFlood insuranceHurricanesImpacted area programsInsurance claimsInsurance lossesInsurance premiumsLossesNatural disastersProgram managementProperty damagesRisk managementSubsidiesDisaster mitigationProgram goals or objectives