Why It Matters

The Trump administration's Federal Emergency Management Agency (FEMA) Review Council, established by Executive Order 14180 in January 2025, has released a sweeping set of recommendations to overhaul the National Flood Insurance Program (NFIP), which provides over $1.3 trillion in coverage. A recent Congressional Research Service (CRS) report shows the FEMA Review Council (FRC) issued its final report on May 7, and FEMA estimates that about 4% of homeowners have flood insurance. The FRC recommendation calls for a gradual, structured transition of certain NFIP policies to the private market in areas where private capacity exists, and shifting policies from the NFIP to the private market would require statutory change.

The NFIP is set to expire on September 30, 2026.

The Big Picture

The NFIP collects about $4.6 billion annually in premiums, fees, and surcharges, yet carries $22.5 billion in debt and has paid over $6 billion in cumulative interest since 2005. Over 22,000 communities across 56 states, territories, and jurisdictions participate. Since the end of fiscal year 2017, 35 short-term NFIP reauthorizations have been enacted.

The council recommended continuing Risk Rating 2.0, the pricing methodology FEMA implemented in 2023 that calculates premiums based on individual property risk. The Government Accountability Office found that about 66% of premiums increased in the first year of this system. Congress capped annual increases at 18% for primary residences and 25% for other policies, meaning it could take until 2037 for 95 percent of policies to reach full risk-based rates.

The council's core proposal calls for a voluntary take-out program to gradually transfer eligible NFIP policies to private insurers where private capacity exists. It also recommended evaluating a centralized flood insurance marketplace through which consumers could select private coverage priced no more than 10% above the full risk-based rate under Risk Rating 2.0. Separately, the council proposed revising compensation paid to private Write Your Own companies, which receive approximately $1 billion annually in expense allowances.

The council acknowledged that most of these reforms require legislative action. It also recommended exempting the NFIP from the Endangered Species Act (ESA) and rescinding related Biological Opinions, though such ESA exemptions are typically granted for specific agency actions rather than all agency actions.

The Bottom Line

A significant pricing gap exists between what the NFIP charges and what private insurers would demand, and private coverage is not guaranteed to all floodplain residents. Public comments on the council's report flagged that it made no recommendations on premium rate increases, funding levels, minimum standards changes, or how to boost overall flood insurance uptake. If policies migrate to private insurers, FEMA would no longer collect Federal Policy Fee revenue designated for floodplain mapping and management programs, yet the council did not recommend addressing that revenue decline.

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