	Introduction

The National Flood Insurance Program (NFIP) was created by the National Flood Insurance Act of 1968 (NFIA). The NFIP is managed by the Federal Emergency Management Agency (FEMA), through its subcomponent the Federal Insurance and Mitigation Administration (FIMA). CRS also has a separate report on flood insurance and other federal disaster assistance programs. Thus, the NFIP essentially has two interrelated policy purposes that can be summarized as
1. to provide access to primary flood insurance, thereby allowing for the transfer of some of the financial risk of property owners to the federal government, and 2. to mitigate and reduce the nation's comprehensive flood risk through the development and implementation of floodplain management standards. Enact minimum floodplain standards based on those flood maps. Risk Mapping, Assessment, and Planning (Risk MAP) and Flood Insurance Rate Maps (FIRMs)

FEMA is responsible for undertaking Flood Insurance Studies (FISs) nationwide to identify areas within the United States having special flood, mudslide, and flood-related erosion hazards; assess the flood risk; and designate insurance zones. Updating Flood Maps

Flood maps adopted across the country vary considerably in age and in quality. There are also legal requirements allowing communities and individuals to appeal during the process of updating FIRMs. Communities are required to adopt these minimum floodplain management standards in order to participate in the NFIP. Flood Mitigation Assistance Grants

To reduce comprehensive flood risk, FEMA also operates a Flood Mitigation Assistance (FMA) Grant Program that is funded through revenue collected by the NFIP. These coverage amounts are set by law. Mandatory Mortgage Purchase Requirement

In a community that participates or has participated in the NFIP, owners of properties in the mapped SFHA are required to purchase flood insurance as a condition of receiving a federally backed mortgage. However, as there is still a risk of flooding outside the SFHA, members of NFIP participating communities with property located in the B, C, or X Zones of a FIRM may voluntarily purchase a lower-cost Preferred Risk Policy. This arrangement between the NFIP and private industry is authorized by statute and guided by regulation. In BW-12, Congress required FEMA to develop and issue a rulemaking on a "methodology for determining the appropriate amounts that property and casualty insurance companies participating in the Write Your Own program should be reimbursed for selling, writing, and servicing flood insurance policies and adjusting flood insurance claims on behalf of the National Flood Insurance Program." Pre-FIRM Subsidy

While most premium rates in the NFIP are intended to represent the full flood risk of a given structure, Congress has directed FEMA not to charge actuarial rates for properties that were constructed or substantially improved before December 31, 1974, or before the date upon which FEMA has published the first Flood Insurance Rate Map for the community, whichever was later. Community Rating System

Through a program called the Community Rating System (CRS), FEMA encourages communities to improve upon the minimum floodplain management standards that are required to participate in the NFIP. These discounts are not extended to PRPs. Communities that have been suspended or those communities that do not participate in the NFIP can face significant consequences. Generally, the NFIP has been funded through three methods:
receipts from the premiums of flood insurance policies, including fees and surcharges; direct annual appropriations for specific costs of the NFIP; and borrowing from the U.S. Treasury when the balance of the NFIF has been insufficient to pay the NFIP's obligations (e.g., insurance claims). In addition to the Reserve Fund assessment, all NFIP policies are also assessed a surcharge following the passage of HFIAA. Borrowing from the U.S. Treasury, NFIP Debt

Congress has authorized FEMA to borrow no more than $30.425 billion from the U.S. Treasury in order to operate the NFIP. On October 26, 2017, Congress cancelled $16 billion of NFIP debt, making it possible for the program to pay claims for Hurricanes Harvey, Irma, and Maria. The NFIP currently has $9.9 billion of remaining borrowing authority. Unless reauthorized or amended by Congress, the following will occur after May 31, 2019:
The authority to provide new flood insurance contracts will expire.
The National Flood Insurance Program (NFIP) was established by the National Flood Insurance Act of 1968 (NFIA, 42 U.S.C. §4001 et seq.), and was most recently reauthorized to May 31, 2019, through a series of short-term reauthorizations. The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk, and to reduce flood risk through the adoption of floodplain management standards. Communities volunteer to participate in the NFIP in order to have access to federal flood insurance, and in return are required to adopt minimum standards.
The NFIP is managed by the Federal Emergency Management Agency (FEMA), through its subcomponent the Federal Insurance and Mitigation Administration (FIMA). FEMA manages a Risk Mapping, Assessment and Planning (Risk MAP) process to produce Flood Insurance Rate Maps (FIRMs). Depicted on FIRMs are Special Flood Hazard Areas (SFHAs), which are areas exposed to a 1% or greater risk of annual flooding. FIRMs vary in age across the country, and are updated on a prioritized basis. The Risk MAP process provides extensive outreach and appeal opportunities for communities. Updating a community's FIRMs can take three to five years or more. Participating communities must adopt a flood map and enact minimum floodplain standards to regulate development in the SFHA. FEMA encourages communities to enhance their floodplain standards by offering reduced premium rates through the Community Rating System (CRS). FEMA also manages a Flood Mitigation Assistance (FMA) grant program using NFIP revenues to further reduce comprehensive flood risk. Participating communities that fail to adopt FIRMs or maintain minimum floodplain standards can be put on probation or suspended from the NFIP. In communities that do not participate in the NFIP, or have been suspended, individuals cannot purchase NFIP insurance. Individuals in these communities also face challenges receiving federal disaster assistance in flood hazard areas, and have difficulties receiving federally backed mortgages.
NFIP insurance uses one of three types of Standard Flood Insurance Policies (SFIPs). SFIPs have maximum coverage limits set by law. Any federal entity that makes, guarantees, or purchases mortgages must, by law, require property owners in the SFHA to purchase flood insurance, generally through the NFIP. In moderate risk areas, community members may purchase Preferred Risk Policies (PRPs) that offer less costly insurance. The day-to-day sale, servicing, and claims processing of NFIP policies are conducted by private industry partners. Most policies are serviced by companies that are reimbursed through the Write Your Own (WYO) Program.
The premium rate for most NFIP policies is intended to reflect the true flood risk. However, Congress has directed FEMA to subsidize flood insurance for properties built before the community's first FIRM (i.e., the pre-FIRM subsidy). In addition, FEMA "grandfathers" properties at their rate from past FIRMs to updated FIRMs through a cross-subsidy.
Congress has provided appropriations to the NFIP for some of the cost of Risk MAP. Congress also authorizes the use of premium revenues for other NFIP costs, including administration, salaries, and other expenses. NFIP premiums also include other charges, such as a Federal Policy Fee, a Reserve Fund assessment, and a surcharge to help fund the NFIP. In October 2017, Congress cancelled $16 billion of NFIP debt, making it possible for the program to pay claims for Hurricanes Harvey, Irma, and Maria. The NFIP currently owes $20.525 billion to the U.S. Treasury, leaving $9.9 billion in borrowing authority from a $30.425 billion limit in law. This debt is serviced by the NFIP and interest is paid through premium revenues.
After May 31, 2019, key authorities of the NFIP, such as the authority to issue new insurance contracts, will expire if they are not reauthorized by Congress.