Flood Insurance: Information on Various Aspects of the National Flood Insurance Program

GAO discussed the Federal Insurance Administration's (FIA) National Flood Insurance Program (NFIP), focusing on the: (1) actuarial soundness of the NFIP Fund and the impact of eliminating subsidized flood insurance rates; (2) procedures used to set flood insurance rates; and (3) NFIP Fund's financial management problems. GAO noted that: (1) the NFIP Fund is not actuarily sound, since it does not have sufficient financial resources to meet future losses and Congress has not funded subsidies provided to insurance policyholders; (2) although requiring subsidized NFIP policyholders to pay actuarial rates could improve the fund's actuarial soundness, a significant number of policyholders could cancel their insurance which would increase other federal disaster relief assistance program costs; (3) it is unclear whether increased costs to other disaster relief programs would be less expensive than current subsidies; (4) 59 percent of NFIP policyholders pay actuarial rates based on actual risk exposure factors, while 41 percent NFIP policyholders pay rates based on estimated annual fund losses; (5) FIA does not have adequate systems or records to monitor the NFIP Fund balance; (6) serious problems with the NFIP financial management system and internal control structure prevent the accumulation and reporting of reliable financial information; and (7) FIA needs to establish a separate NFIP balance in the Treasury and reexamine its decision not to make short-term improvements in the NFIP financial management system.