David Lalonde, FCAS, FCIA, MAAA is senior vice president at catastrophe modeling firm AIR Worldwide.
Flooding is one of the costliest natural disasters in the United States, causing an average of $5 billion in economic losses every year. Following several destructive hurricanes and associated storm surge events in the 1960s, many insurers ceased covering residential flood risk in the U.S. Without the tools to accurately quantify and price the risk, insurers have been unable to offer flood insurance at "affordable" rates to the public. As a result, government-sponsored flood insurance comprises the majority of the residential market.
In 1968, Congress established the National Flood Insurance Program (NFIP) to address the shortfall in the availability of affordable flood coverage. From its inception, the NFIP has been managed by the Federal Emergency Management Agency (FEMA) and guided by three mandates: provide residential and commercial insurance coverage for flood damage, improve floodplain management, and develop maps of flood hazard zones.
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