Flood Insurance: Implications of Changing Coverage Limits and Expanding Coverage Page: 7 of 42
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To describe the existing federal flood insurance market, we analyzed
NFIP's Policy and Claims Masterfiles. We used NFIP's database of
policies to identify all residential single-unit and nonresidential
(commercial) claims with maximum coverage at the end of fiscal year
2012.6 We also analyzed the policy database to identify the total
residential policies and commercial policies for each fiscal year from 2002
through 2012 and calculated the proportional increase of those with
maximum building coverage. We further analyzed residential single-unit
policy coverage for 2011 to investigate the association between the
percentage of each state's policyholders with maximum coverage and a
state's median home value. In addition, we calculated average payments
for residential and commercial claims that were closed and closed without
payment for the period from 2007 through 2012 using data from FEMA's
BureauNet.' To address the effect on NFIP, the private insurance market,
and consumers of increasing NFIP coverage limits or adding optional
coverage for business interruption and additional living expenses, we
interviewed industry experts, including representatives from FEMA,
insurance industry organizations, brokers, insurance companies, and
consumer advocacy organizations. Using NFIP's claims and policy
databases, we estimated the effect on NFIP's financial condition of raising
coverage limits from $250,000 to $417,000 by estimating the impact on
net revenue (premiums less claim payments) for residential single-unit
dwellings from 2002 through 2011.8 We conducted electronic testing of
specific data elements to test for missing data, validity, and
reasonableness and interviewed knowledgeable agency officials to
assure the reliability of the data, and we determined the data to be
reliable for our purposes. To address all objectives, we also reviewed
prior GAO reports and testimonies and relevant studies conducted by
6Nonresidential includes, but is not limited to, small businesses, churches, schools, farm
buildings (including grain bins and silos), pool houses, clubhouses, recreational buildings,
mercantile structures, agricultural and industrial structures, warehouses, hotels and motels
with normal room rentals for less than 6 months' duration, and nursing homes. For the
purposes of this report, we refer to nonresidential policies as commercial.
7BureauNet is the system that FEMA uses to collect, manage, and access its policy,
claims, and policyholder data.
8The upper limit of $417,000 used in our analysis, as required by the Biggert-Waters Act,
corresponds to the conforming loan limit for Fannie Mae and Freddie Mac (the
enterprises). The enterprises are restricted by law to purchasing single-family mortgages
with origination balances below a specific amount, known as the "conforming loan limit."
The limit was increased to $417,000 in 2006 and remained at this level, as of 2012, with
exceptions for certain high-cost areas.
GAO-13-568 Flood Insurance Coverage
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United States. Government Accountability Office. Flood Insurance: Implications of Changing Coverage Limits and Expanding Coverage, report, July 3, 2013; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc299233/m1/7/: accessed May 20, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.