Flooded neighborhood. Credit: On-Air/Adobe Stock According to the Government Accountability Office, FEMA has borrowed some $36.5 billion since 2005 to cover NFIP losses, and would have to use revenue from current and future policyholders to repay it. The debut is largely due to discounted premiums that FEMA has been statutorily required to provide, which in turn has the effect of charging future and current policyholders for previously incurred losses. Credit: On-Air/Adobe Stock

Although Risk Rating 2.0, the updated rate-setting method for the National Flood Insurance Program (NFIP), better aligns the program's premiums with the flood risk of individual properties, it still fails to achieve actuarial sound rates, according to a report from the Government Accountability Office (GAO).

The NFIP has long been plagued by rate inadequacy, with a report from Poulton Associates, LLC and HazardHub finding that the program's premiums fell 9% from 2014-2019, despite Congress mandating 5% annual increases.

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Steve Hallo

Steve Hallo is managing editor of PropertyCasualty360.com. He can be reached at [email protected]