An abridged history of the National Flood Insurance Program
While the NFIP was established in 1968, interest in such a program stretches back much further.
Editor’s note: This column is part of PropertyCasualty360’s Foundations of P&C Insurance series, which aims to bring new insurance professionals up to speed, while keeping industry veterans sharp. On Fridays, PC360 will offer up fresh content covering the nitty-gritty details of P&C insurance, tips for professional development, articles looking at the industry’s more niche concepts, and the history of certain lines and programs.
In 1968, Congress enacted legislation that led to the establishment of the National Flood Insurance Program, which was designed to address the absence of private insurance and the growing reliance on federal disaster aid resulting from floods, according to the National Association of Insurance Commissioners.
The voluntary program also helps mitigate flooding risks by requiring communities to adopt and enforce floodplain management regulations such as limiting development in floodplains, as designated by the Federal Emergency Management Agency. In exchange for opting into the program, the federal government makes flood insurance available to all residents in the community.
While the National Flood Insurance Act of 1968 created the program, the idea of a national flood insurance plan started more than a decade earlier.
In May 1951, flood waters stretched across thousands of square miles in Kansas and Missouri. In his address to Congress the following year, President Harry Truman proposed establishing a federal insurance program, which would have been administered by the insurance industry. The $1.5 billion proposal would have seen the federal government underwrite 90% of the value of an individual’s flood-damaged property, up to a maximum of $250,000, according to a report in the December 1978 edition of the “CPCU Journal,” which reported Congress did not take up the idea.
The proposition of a national flood program again gained steam following 1954’s Hurricane Carol striking New England, which saw heavy flooding in 1955 as well. These incidents prompted President Dwight D. Eisenhower to introduce the Federal Flood Indemnity Act in 1956. Congress passed the $2.9 billion, five-year flood insurance program, which covered homes for up to $10,000 of damage and businesses for up to $250,000. Federal and state governments subsidized 40% of the insurance rate, and private carriers would sell and service the insurance and take on claims responsibilities.
The Federal Flood Indemnity Act’s provision took about a year to develop, and by the spring of 1957 the Federal Flood Indemnity Administration and its insurance program were ready to start offering coverage. However, the House Appropriations Committee decided against funding the program and attempts to amend the appropriations bill failed to gain traction in the House of Representatives. The administration was abolished by administrative order.
Interest in a federal flood program waned for a few years. Things changed in the early 1960s, which saw a wave of hurricanes along the Gulf Coast as well as flooding in the Pacific Northwest, New Jersey and Delaware.
Through the mid-1960s, a number of reports and studies were conducted that reviewed various methods for carrying out a national flood program. In the summer of 1968, the Housing and Urban Development Act, which included the National Flood Insurance Act, became law.
Since then, Congress has reauthorized the program a number of times with the last long-term reauthorization taking place in 2012. That five-year reauthorization ended in 2017 and since then there have been more than 25 short-term reauthorizations, according to the National Association of County Officials.
PropertyCasualty360.com editor’s note: A debt of gratitude is owed to Craig Poulton of Poulton Associates LLC for sharing the archival insurance trade publications that were used for background in this report.
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