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Flood Insurance 101
Background on the National Flood Insurance Program (NFIP)
The NFIP is a Federal program enabling property owners in participating communities to purchase insurance protection against losses from flooding. This insurance is designed to provide an insurance alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by floods. Participation in the NFIP is based on an agreement between local communities and the Federal Government that states if a community will adopt and enforce a floodplain management ordinance to reduce future flood risks to new construction in Special Flood Hazard Areas, the Federal Government will make flood insurance available within the community as a financial protection against flood losses.
For decades, the national response to flood disasters was generally limited to constructing flood-control works such as dams, levees, seawalls, and the like, and providing disaster relief to flood victims. This approach did not reduce losses, nor did it discourage unwise development. In some instances, it may have actually encouraged additional questionable development. To compound the problem, the public generally could not buy flood coverage from insurance companies, and building techniques to reduce flood damage were often overlooked. In the face of mounting flood losses and escalating costs of disaster relief to the general taxpayers, the U.S. Congress created the NFIP. The intent was to reduce future flood damage through community floodplain management ordinances, and provide protection for property owners against potential losses through an insurance mechanism that requires a premium to be paid for the protection.
The U.S. Congress established the NFIP on August 1, 1968, with the passage of the National Flood Insurance Act of 1968. The NFIP was broadened and modified with the passage of the Flood Disaster Protection Act of 1973 and other legislative measures. It was further modified by the National Flood Insurance Reform Act of 1994 and the Flood Insurance Reform Act of 2004. The NFIP is administered by the Federal Emergency Management Agency (FEMA), a component of the U.S. Department of Homeland Security (DHS).
What Is The Write Your Own (WYO) Program?
The Write Your Own (WYO) Program began in 1983 and is a cooperative undertaking of the insurance industry and FEMA. The WYO Program allows participating property and casualty insurance companies to write and service the Standard Flood Insurance Policy in their own names. The WYO Program operates as part of the NFIP, and is subject to its rules and regulations.
The goals of the WYO Program are:
- Increase the NFIP policy base and the geographic distribution of policies;
- Improve service to NFIP policyholders through the infusion of insurance industry knowledge;
- Provide the insurance industry with direct operating experience with flood insurance.
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