Research & Commentary: Federal Flood Insurance Subsidies in Puget Sound

Published April 23, 2012

For more than four decades, the National Flood Insurance Program (NFIP) has subsidized construction in floodplains in the United States. Although intended to break even and discourage construction in the most flood-prone areas, NFIP has done neither. It writes insurance in many flood-prone areas the private market wouldn’t touch, and it currently owes the U.S. Treasury more than $18 billion. Other taxpayer-funded disaster loans and structural mitigation and erosion control programs further encourage development in floodplains. 

In an effort to prevent environmentally damaging and economically expensive construction in the floodplains of Puget Sound, the National Wildlife Federation filed a lawsuit against the Federal Emergency Management Agency seeking a moratorium on flood insurance policies for properties near the sound. The lawsuit cites potential harm to salmon and orca populations if the government continues to provide flood insurance, and nearly all observers agree the benefits of preserving floodplains—as habitats for non-endangered species, buffers against inland flooding, and areas for outdoor recreation—exceed the issues at stake in the lawsuit. 

Opponents of the lawsuit cite private developers’ inability to afford private insurance coverage for construction and say the federal and local governments are already doing enough to protect the species in question. 

The following articles examine the National Flood Insurance Program, its subsidy for floodplain and coastal development, and the current battle to regulate flood insurance in the Puget Sound region. 

Group Wants Moratorium on Flood Insurance
Writing in the News-Tribune, Phuong Le of the Associated Press reports on the National Wildlife Federation’s lawsuit to prevent expansion of the National Flood Insurance Program to cover environmentally sensitive wetlands near Washington State’s Puget Sound. 

Environmentalists Fight FEMA over Puget Sound
Paul Darin and Lisa Wederspahn of the Epoch Times discuss the legal efforts of the National Wildlife Federation to prevent development in the floodplains of Puget Sound and several lawsuits filed against the Federal Emergency Management Agency since 2003. 

Subsidizing Disaster]
Christy Black of the National Center for Policy Analysis examines the National Flood Insurance Program and the consequences of subsidizing home construction in flood-prone areas.

FAQ: A Guide to Flooding in Puget Sound
The National Wildlife Federation outlines its stance against construction in the Puget Sound floodplains and its opposition to federal subsidies of flood insurance. While endangering local wildlife, the government’s flood insurance policies have cost the region millions of dollars and far too many lives, the NWF argues. 

Watery Marauders: How the Federal Government Retarded the Development of Private Flood Insurance
Eli Lehrer of The Heartland Institute examines the development of the National Flood Insurance Program and its negative effects on the growth of private flood insurers. 

GAO Report Slams FEMA Management of National Flood Insurance Program
The Heartlander digital magazine reports on a recent Government Accountability Office study criticizing the Federal Emergency Management Agency’s management of the National Flood Insurance Program. 

Moral Hazard in Action: Who Insures Against Floods and Why?
Writing for Consumers’ Research, John Hood explains how the National Flood Insurance Program skews the perception of flood risk, inducing homeowners to build in flood-prone areas, with disastrous results. 

Congress to Mull Major Reforms to National Flood Insurance Program
The Heartlander digital magazine examines several measures Congress will be considering to reform or even eliminate the debt-ridden National Flood Insurance Program. 

Research & Commentary: Flood Mitigation, Levees, and Flood Maps–commentary-flood-mitigation-levees-and-flood-maps
This Research & Commentary examines the role of levees in flood mitigation, the importance of accurate flood mapping, and the effects of map changes on flood insurance.