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journal article
Participation in the National Flood Insurance Program: An Empirical Analysis for Coastal PropertiesThe Journal of Risk and Insurance
Vol. 71, No. 3 [Sep., 2004]
, pp. 405-420 [16 pages]
Published By: American Risk and Insurance Association
//www.jstor.org/stable/3520070
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Abstract
A perennial question about the National Flood Insurance Program is: how can participation be increased? An empirical analysis of individual-level data reveals that in a sample of coastal areas the participation rate is 49 percent of eligible properties. Participation responsiveness to price is inelastic, but it has been increased by the mandatory purchase requirements for mortgage borrowers. Easing conditions for participation in the program would probably not reduce flood control measures, such as seawalls, which may degrade beach conditions and coastal ecosystems.
Journal Information
The Journal of Risk and Insurance publishes rigorous, original research in insurance economics and risk management. This includes the following areas of specialization: [1] industrial organization of insurance markets; [2] management of risks in the private and public sectors; [3] insurance finance, financial pricing, financial management; [4] economics of employee benefits, pension plans, and social insurance; [5] utility theory, demand for insurance, moral hazard, and adverse selection; [6] insurance regulation; [7] actuarial and statistical methodology; and [8] economics of insurance institutions. Both theoretical and empirical submissions are encouraged. Empirical work should provide tests of hypotheses based on sound theoretical foundations. JSTOR provides a digital archive of the print version of The Journal of Risk and Insurance. The electronic version of The Journal of Risk and Insurance is available at //www.blackwell-synergy.com/servlet/useragent?func=showIssues&code;=jori. Authorized users may be able to access the full text articles at this site.
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The American Risk and Insurance Association [ARIA] is a worldwide group of academic, professional, and regulatory leaders in insurance, risk management, and related areas, joined together to advance the study and understanding of the field. Founded in 1932, ARIA emphasizes research relevant to the operational concerns and functions of insurance and risk management professionals and provides resources, information, and support on important insurance and risk management issues. Two main goals of the organization are 1] to expand and improve academic instruction of risk management and insurance, and, 2] to encourage research on all significant aspects of risk management and insurance.
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The Federal Insurance and Mitigation Administration [FIMA], a division of the Federal Emergency Management Agency [FEMA], makes flood insurance available in areas where the appropriate public body has adopted adequate floodplain management regulations for its flood-prone areas. Community participation is voluntary, although some states require NFIP participation as part of their floodplain management program. Communities who wish
to participate in the National Flood Insurance Program [NFIP] must fulfill two phases: NFIP Emergency Program NFIP Regular Program Community participation in the NFIP is promoted in two ways: the community develops interest in flood insurance, or FEMA notifies the community that it contains one or more Special Flood Hazard Areas [SFHA]. Communities include in their
applications resolutions or ordinances the community has adopted to regulate new construction in the SFHA. The resolutions or ordinances do not need to be burdensome, but rather add only minimal new regulation. [Note: A flood-prone community that does not apply for participation in the NFIP within one year of notification is ineligible for federal or federally-related financial assistance for acquisition, construction, or reconstruction of insurable buildings in the SFHA.] After
assessing the community's degree of flood risk and development potential, FEMA authorizes the sale of flood insurance in the community up to the Emergency Program limits [Table 1].Introduction
Phase 1. NFIP Emergency Program
If appropriate, FEMA arranges for a study of the community to determine base flood elevations and flood risk zones. Consultation with the community occurs throughout the study. Communities with minimal or no flood risk are converted to the Regular Program without a study.
FEMA provides the studied community with a Flood Insurance Rate Map delineating base flood elevations and flood risk zones. The community has six months to meet the requirements, such as the adoption of base flood elevations in local zoning and building code ordinances.
Once the community adopts more stringent ordinances, FEMA converts the community to NFIP's Regular Program [Phase 2].
Phase 2. NFIP Regular Program
FEMA authorizes the sale of additional flood insurance in the community up to Regular Program limits [Table 2].
The community implements adopted floodplain management measures.
FEMA arranges for periodic community assistance visits with local officials to provide technical assistance regarding compliance with NFIP floodplain management requirements.
Local officials may request flood map updates as needed. FEMA evaluates requests, encourages cost-sharing, and issues revised maps as priorities dictate.
Sources for This Publication
National Flood Insurance Program: How the NFIP Works. Federal Emergency Management Agency, Access online at //dem.nv.gov/uploadedFiles/demnvgov/content/Resources/How%20the%20NFIP%20Works%20022010.pdf
Introduction to the National Flood Insurance Program [NFIP]. Congressional Research Service, Access online at //fas.org/sgp/crs/homesec/R44593.pdf
Tables
Table 1.
Emergency program flood insurance coverage limits.
Table 2.
Regular program flood insurance coverage limits