**GAO-09-420R**                      Published: Feb 27, 2009. Publicly Released: Mar 30, 2009.                  

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## Highlights

The National Flood Insurance Program (NFIP) was created in 1968 and currently has more than 5.6 million policyholders that are insured for about $1.1 trillion. The program collects about $2.9 billion in annual premiums. As of January 2009, NFIP owed approximately $19.2 billion to the U.S. Treasury, primarily as a result of loans that the program received to pay claims from the 2005 hurricane season. According to the Federal Emergency Management Agency (FEMA) of the Department of Homeland Security (DHS), which administers the program, this debt is greater than the sum of all previous losses since the program's inception in 1968. While FEMA officials told us that interest payments are estimated to be lower in 2010, as of October 2008, NFIP owed interest payments of $730 million a year to Treasury and has had to borrow more from the Treasury to make these payments. As a result, it is unlikely that NFIP will ever be able to repay the entire debt. Because of NFIP's financial situation, in 2006 GAO placed the program on the high-risk list. In 2008, GAO issued three reports covering issues directly related to NFIP. NFIP is subject to periodic reauthorization and its current authorization has been extended until March 2009. As Congress considers reauthorization of NFIP and potential reforms to the program, Congress asked us to provide a briefing on (1) the percentage and geographic distribution of policyholders that purchase the maximum NFIP coverage, (2) the availability of private commercial and residential flood insurance, (3) the potential effect of adding business interruption coverage to commercial flood insurance, particularly for small and medium-sized businesses, and (4) the challenges and issues surrounding the potential creation of an NFIP loss fund.

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## Topics

Economic Development

ClaimsClaims processingDebtDisaster recoveryDisaster relief aidFlood insuranceInsuranceInsurance companiesInsurance lossesInsurance premiumsInterestMortgage loansNatural disastersPaymentsPersonal propertyPropertyProperty lossesProposed legislationReal propertySmall business