Participation in the Community Rating System of NFIP: An Empirical Analysis of North Carolina Counties
39 Pages Posted: 25 May 2011 Last revised: 11 Oct 2011
Date Written: October 11, 2011
In order to motivate flood insurance purchase and promote flood hazard awareness and mitigation, the Community Rating System (CRS) of National Flood Insurance Program (NFIP), credits floodplain management activities and awards flood insurance premium discounts. CRS, however, has been marked by a lack of active participation since its inception. The objective of this study is to provide empirical evidence related to community decisions involving incentive-based flood risk mitigation projects. We test a number of hypotheses offered by previous researchers regarding factors that motivate local hazard management initiatives through an examination of patterns in CRS participation across all 100 North Carolina counties from 1991 to 2002. Specifically, we examine the influence of flood experience, hydrological risk, local capacity, and socioeconomic factors on county hazard mitigation decisions. Results indicate that flood history and physical risk factors increase likelihood of local hazard mitigation adoption. We find evidence that the probability of CRS participation is lower in counties with a greater proportion of senior citizens and greater level of education, and that flood hazard mitigation activities at the county level are more likely when a greater number of nested of municipalities participate in CRS.
Keywords: flood, hazard, community, mitigation, insurance, panel data, probit regression
JEL Classification: D70, D80, H41
Suggested Citation: Suggested Citation