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isks. 575 But shifting some of the burden from taxpayers and the government to the owners of
properties over and over again. 568 According to FEMA, these types of properties cost the
program $12.1 billion as of December 2011. 569
Policyholders receiving subsidized insurance rates through NFIP are getting a very good
deal compared to what they would otherwise pay if they were required to insure the full cost of
the risk exposure of their property. According to estimates, premiums for subsidized structures
represent about 40 percent of the true risk premium, 570 at a projected average annual subsidized
premium of $1,121 as of October 2010, discounted from the $2,500 to $2,800 that FEMA said
would be required to cover the full risk of loss. 571 For properties in areas where the probability
of flooding is particularly high, full-risk premium would cost triple the subsidized rates. 572
In 2012, Congress took action to reform the unsustainable fiscal position of the NFIP and
passed the Biggert-Waters Flood Insurance Reform Act, which included provisions that would
raise premium rates, and reduce incentives to build in high-risk flood zones. 573 In particular, the
law eliminated subsidies for second properties, required the phase-in of actuarial rates, and
increased the annual cap on rate increases from 10 percent to 20 percent, among other provisions
aimed at reforming program management. 574 Although the bill was not perfect, the GAO
estimated that Biggert-Waters eliminated subsidies on roughly 438,000 policies, a key move to
bring long overdue fiscal stability to the program and reduce taxpayers’ exposure to flooding
properties that are exposed to the risk of floods proved unpopular, particularly to the people
who were facing higher premium costs. As is often the case in Congress, parochial interests
trumped fiscally responsible reforms, and many of the changes made under Biggert-Waters were
568 Congressional Research Service, “The National Flood Insurance Program: Status and Remaining Issues for
Congress,” R42850, February 6, 2013, pg. 20.
569 Ibid, pg. 20.
570 Federal Emergency Management Agency, “National Flood Insurance Program Actuarial Rate Review In Support
of the Recommended October 1, 2011 Rate and Rule Changes,” pg.9, available at https://www.fema.gov/medialibrary/assets/documents/23143?id=4853
571 U.S. Government Accountability Office, “Flood Insurance: Public Policy Goals Provide a Framework for Reform,”
GAO-11-429T, March 11, 2011, pg. 4, available at http://www.gao.gov/assets/130/125706.pdf .
572 Ibid, pg.5.
573 Congressional Research Service, “The National Flood Insurance Program: Status and Remaining Issues for
Congress,” R42850, February 6, 2013, pg. 35.
574 Ibid, pg. 35.
575 U.S. Government Accountability Office, “Flood Insurance: More Information Needed on Subsidized Properties,”
GAO-13-607, July 2013, pg.12, available at http://www.gao.gov/assets/660/655734.pdf .
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