Measuring the Impacts of the National Flood Insurance Program

Abstract

The National Flood Insurance Program was established in 1968 as a federally administered insurance program to reduce costs to the federal government for flood recovery and allocate recovery costs among potential disaster relief beneficiaries. Participants purchase flood insurance through participating property insurance providers which receive a haircut of the premium for overhead costs and passes the remainder to the Federal Emergency Management Agency. This paper outlines a model to measure the net social benefits attributable to the insurance component of the NFIP. Development of this model provides the baseline for further economic and social analysis of the NFIP.

Keywords: flood insurance, disaster management, benefit-cost analysis, social surplus, risk management

JEL Classification: H84, D63, H43