The National Flood Insurance Program (NFIP), in a sense, is responsible for the modern American suburb. Construction of the Interstate Highway System, easy mortgage insurance from the Veterans Administration and Federal Housing Administration and a host of federal, state and local rules favoring low-density residential development all played a role in the nation’s post-war suburbanization, to be sure. But the 1968 creation of the NFIP really changed the landscape, literally, by allowing acres of lush river valleys and miles of coastal land to be transformed into manicured lawns and beachfront cottages.

Unfortunately, after nearly 45 years the NFIP is unsustainable, with some $30 billion in debt that it has no means to repay. With some 5.6 million policyholders across the country, the program also has sparked development in the most risk-prone and environmentally sensitive regions, threatening innumerable endangered species, depleting wetlands and overdeveloping barrier islands that serve as natural buffers against hurricanes.

Today, global warming and rising sea levels appear likely to make future floods and tropical storms both more frequent and more severe. To prepare for that, a functioning private market must be part of the solution. When property owners don’t bear the full cost of the risks they face, they are encouraged to take on more. Transitioning to a private, risk-based insurance market for floods will not be easy, but it is a challenge private insurers can meet, just as they have done in countries such as the United Kingdom and Australia. Advances in mapping, risk modeling and the ability to spread risk across the globe means that most of the logistical problems the insurance industry once faced in underwriting floods have been long solved.

Private flood insurance would be expensive, although not nearly as expensive as continually rebuilding flood-prone communities that have no incentive to adapt and mitigate risk because that risk is borne by others. Some policyholders may need financial assistance to harden their homes against flooding, pay their premiums or move to higher ground. But research by the Institute for Policy Integrity shows that the NFIP’s benefits currently flow overwhelmingly to the rich, with the wealthiest counties filing 3.5 times more claims and receiving $1 billion more in NFIP payments between 1998 and 2008 than the poorest counties.

The NFIP has helped shape the country, for good and for ill. To tackle long-term challenges, both budgetary and environmental, it must be phased out.

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