Flood Insurance

Information on Various Aspects of the National Flood Insurance Program Gao ID: T-RCED-93-70 September 14, 1993

A series of recent disasters--the December 1992 nor'easter, the March 1993 storm in Florida, and the record floods in the Midwest this summer--have virtually wiped out the National Flood Insurance Program, raising doubts about whether it will have enough money to meet current and future claims arising from flood damage. GAO notes that the fund is not, nor is it required to be, actuarially sound, mainly because Congress authorized below-market insurance rates for policyholders without providing annual appropriations to cover the subsidy. This testimony reviews (1) the actuarial soundness of the fund and the implication of ending its subsidized flood insurance rates, (2) procedures used to set the program's flood insurance rates, and (3) financial management problems addressed in Inspector General audits of the fund.

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