Project 2025 Aims to End the National Flood Insurance Program | Insurify
Project 2025, the presidential transition plan of the
"When flood costs exceed NFIP's revenue,
The group points to the subsidization of flood insurance costs and growing NFIP debts.
"Current NFIP debt is
The National Flood Insurance Act of 1968 launched the NFIP to address an increasing need for flood insurance because privatized coverage was often not available or was unaffordable.
The NFIP is able to borrow money from the federal treasury in the case of extreme flooding events, and the total cost of flood-related claims has exceeded NFIP premiums ever since Hurricane Katrina in 2005.
As of
How this would affect the flood insurance market
The NFIP sells coverage through NFIP Direct and private insurance partners, and would-be policyholders must live in an NFIP community to purchase coverage. About 1,500 communities participate in the Community Rating System (CRS), the NFIP's voluntary incentive program that rewards communities that take measures to reduce flood risks. Municipalities have the right to opt out of participation in the program.
Policy limits through the NFIP are
Property owners living in special flood hazard areas (SFHAs) identified by
"The Community Rating System is a critical element of having flood insurance written through the National Flood Insurance Program. It can provide discounts up to 45% off base rates for residents who live in participating communities," said
In total, CRS communities include more than 3.6 million policyholders and make up more than 70% of NFIP policies.
"Eliminating NFIP could lead to a significant spike in premiums in the private market and cause many more homeowners to forgo flood coverage unless they are required to have it by their mortgage lender," said Friedlander.
Can the private market fill the gap?
If implemented, Project 2025's plan to cut the NFIP would prioritize private flood insurance in place of federally subsidized coverage.
"The NFIP should be wound down and replaced with private insurance starting with the least risky areas currently identified by the program," said the group in its playbook.
It's not clear whether the private insurance market can fill the gap. If people can't purchase more affordable insurance through the NFIP, they may opt out of coverage.
"This is especially true in
A 2023 consumer survey from
"While market share for private flood insurers is growing (about a third of the U.S. market as of year-end 2022), private flood coverage may not be available or affordable for all homeowners seeking coverage," said Friedlander.
What's next?
The conservative group behind Project 2025 — the
Former President
Despite Trump and his campaign denying any involvement with Project 2025, many have speculated that his administration would implement aspects of the playbook if he wins the election in November.
Unrelated to Project 2025's proposal to cut the program, the NFIP will lapse on
Reauthorization is a common process —
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