Flood

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BattleTable

Based on past exams, the main things you need to know (in rough order of importance) are:

• funding for NFIP including mechanisms & concerns about sustainability
• Biggert-Waters flood insurance reform act of 2012

The Horn & Brown reading on the National Flood Insurance Program (NFIP) was new to the syllabus for 2018.Fall. It is dated September 12, 2017. The previous NFIP reading was dated February 6, 2013 and although many components of NFIP are unchanged, the reading is organized differently. (It isn't just a minor update.) Many of the exam questions from the old reading are still relevant, however. Questions in the BattleTable that are not relevant anymore are highlighted in tan.

reference	part (a)	part (b)	part (c)	part (d)
E (2017.Fall #8)	funding: - concerns regarding NFIP	participation rate: - why it's low for NFIP	participation rate: - how to increase	wind coverage under NFIP: - arguments for & against
E (2017.Spring#8)	risk transfer process: - crop & flood insurance1	risk transfer process: - criticisms
E (2016.Fall #9)	NFIP challeneges: - sustainability, assessment	flood plain development: - ways to reduce
E (2016.Spring#9)	uninsurability: - of flood risk	functions: - NFIP	Biggert-Waters: - provisions
E (2015.Fall #8)	funding: - NFIP	Biggert-Waters: - NFIP premium subsidies	Biggert-Waters: - NFIP participation rate
E (2015.Spring#9)	see Germani.GovtIns - [Hint: FCC(ES)]	statutory mandate: - NFIP	moral hazard: - impact on NFIP	adverse selection: - impact on NFIP
E (2014.Fall #9)	funding: - NFIPN	funding: - social security	funding: - shortfall for NFIP
E (2013.Fall #13)	ratemaking principles: - satisfied by NFIP?	improvements: - to NFIP

¹ See Germani.GovtIns for the crop insurance part of this question.

^N Part (a.i) on social security is no longer on the syllabus.

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In Plain English!

Intro

Don't bother reading the Summary from the Horn reading. (And no, I'm not using reverse psychology!) It's confusing. I've summarized below what it covers. We'll just use common sense along with old exam problems to predict likely future questions. The point is not to acquire a comprehensive knowledge of NFIP. The point is to memorize as few key facts as possible to be able to answer likely exam questions.

paragraph 1 (general info)

• purpose of NFIP (flood insurance & mitigation)
• participation in NFIP is voluntary

paragraph 2 (flood maps)

• FEMA makes FIRMs (FIRMs = Flood Insurance Risk Maps)
• FIRMs identify SFHAs (SFHAs = Special Flood Hazard Areas)

paragraph 3 (policies)

• there are 3 types of SFIPs (Standard Flood Insurance Policies)
• property owners is SFHAs must buy flood insurance
• property owners in moderate risk areas may buy PRPs (Preferred Risk Policies) that are cheaper

paragraph 4 (premiums)

• should reflect true costs but some subsidies are available

paragraph 5 (suspension from NFIP)

• probation or suspension from NFIP makes it hard to get disaster relief

paragraph 6 (NFIP funding)

• funded by congressional appropriations and premiums
• NFIP owes treasury $25b (serviced by NFIP, not taxpayers)
• repayment schedule is uncertain (NFIP may not be sustainable)

Paragraph 1 (General Info)

Question: what is the purpose of NFIP [Hint: AM&R] (see top of page 2 in Horn & Brown reading)

Access: provide access to primary insurance (transfers some of the financial risk to the federal government)

Mitgate & Reduce: mitigate & reduce flood risk through floodplain management standards (these standards are discussed further down)

Question: is participation in NFIP voluntary or mandatory

• participation is voluntary (of course if participation is voluntary, there is risk of adverse selection – only people living in a floodplain would participate but then cost-based rates would be unaffordable)

Question: how is participation in NFIP encouraged

• The Federal Emergency Management Agency, or FEMA, is allowed to provide flood insurance only to regions that adopt and enforce adequate land use and control measures.
• This is done through local or state laws for minimum floodplain management standards as described in FEMA regulations

Paragraph 2 (Flood Maps)

Question: how does NFIP reduce flood risk

NFIP requires participating communities to:

• create FIRMs (communities collaborate with FEMA to create & adopt Flood Insurance Rate Maps)
• enact minimum floodplain management standards based on these maps

Question: identify specific intentions of the minimum floodplain management standards [Hint: restrict-guide-reduce]

restrict development on flood-prone land

guide development away from flood-prone land

reduce damage caused by floods

Paragraph 6 (Funding)

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BattleCodes

Memorize:

Conceptual:

Calculational: