1.5.2 Direct economic loss attributed to disasters in relation to global gross domestic product (GDP)

In 1968 Congress passed the National Flood Insurance Act (NFIA), establishing the National Flood Insurance Program (NFIP) in order to reduce the impact of future flood losses through flood hazard identification, managing floodplains, and providing insurance protection. The National Flood Insurance Program falls under the scope of the Federal Emergency Management Agency (FEMA). The 1968 act also includes paid premiums of SFIPs and claims payments for damaged property, which is processed by the National Flood Insurance Fund (NFIF). NFIF is a revenue and fee-generated fund that supports NFIP, using U.S. Treasury Funds, direct annual appropriations for specific costs of the NFIP, and the fees from premiums of flood insurance policies for the claims funding.

At the time of establishment of the NFIP, as is generally still the case today, it was found that “many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions”. The NFIP has paved a path for residents and business owners in both high-risk and moderate-to-low-risk locations to get federal flood insurance. Buildings in high-risk locations with loans from federally regulated or insured lenders are required to have insurance. The Small Business Administration’s disaster aid loans are subject to this criteria. You don’t need a mortgage or an SBA loan, and you don’t have to live in a high risk flood area to obtain the insurance. The insurance is provided throughout the community, with premiums varying depending on the level of risk.. In fact, about 25 percent of all flood claims occur in moderate- to low- risk areas.

The NFIP claims process takes place once you report the loss from a flood event to your insurance agent. From there, an adjuster will be assigned to your case to work with you to reach an agreed amount for the damage incurred from the flood. Once an amount is agreed upon, your insurance agent will pay the amount you are requesting, or may provide the adjusting firm with their recommendation. If the insurer does not agree with the amount for loss, an official letter will be sent to you explaining the reasoning for the disallowance of the portion of some of your claim.