Federal policymakers have struggled for years to find ways to put the National Flood Insurance Program (NFIP) on a sound financial footing. Run by the Federal Emergency Management Association (FEMA), the NFIP fell deep into debt after series of hurricanes, including the catastrophic Hurricane Katrina, lashed the Gulf Coastal states a decade ago.

Congress responded by instructing FEMA to set steeper premiums. But the higher price tag for flood insurance (which is legally required for mortgage-holders in flood zones) created a political backlash, leading lawmakers to backtrack on the plan. But even the revised reform plan is starting to hit homeowners with premium hikes. Now, observers say there's a second backlash: the shock of higher premiums is causing some homeowners to drop the insurance — which could further undermine the program's solvency.

"It's beginning to look like residents in Florida were seriously unhappy with the NFIP's extortion-like rate hikes, and with the feeble justifications from the Federal Emergency Management Agency," commented Tampa Bay Times columnist John Romano in a December editorial (see: "Romano: Flood insurance program could be under water without Florida policies"). "According to data collected by the Palm Beach Post, the NFIP has lost nearly 300,000 policies in Florida since 2009."

The Post described the problem in an October story (see: "Florida leads U.S. dive in flood policies after Congress ups costs," by Charles Elmore). "Trend lines show the number of U.S. flood policies holding mostly steady near 5.6 million before a significant drop starting in 2013 and diving toward 5.1 million this fall — after the Biggert-Waters Act of 2012 and a subsequent rewrite raised costs to many homeowners," the paper reported. "Records do not quantify what effects may have come from factors like updated flood maps, which can move people in and out of high-risk zones; failures by lenders to enforce required flood coverage in high-risk zones; flood mitigation efforts; or limited efforts by private insurers to offer policies. But they suggest many property owners with a choice — that is, not required to buy flood insurance to satisfy mortgage requirements — are heading for the exits."

And Floridians may have grounds for believing that flood insurance isn't worth the price. State officials say that Florida has been paying more into the flood insurance program than it gets out of it — for a long, long time. "Florida Insurance Commissioner Kevin McCarty said on Aug. 14 that the National Flood Insurance Program’s (NFIP) rates for Florida may be 'unfairly discriminatory' and that his office will ask for the actuarial study, including data and models used to determine rates in the state, from the Federal Emergency Management Agency (FEMA) for further examination," reported the Insurance Journal in August (see: "Florida Commissioner McCarty Says NFIP Rates May Be Unfairly Discriminatory").

McCarty has gotten a response from FEMA, reported the Palm Beach Post  this month (see: "Insurers 'encouraged’ by talks on flood insurance to set better rates," by Charles Elmore). "The Federal Emergency Management Agency on Tuesday acknowledged 'concerns about fairness' in flood insurance rates and said it will respond to a request by Florida’s top regulator for data to help private insurers better set rates and compete," the Post reported. Florida leads U.S. dive in flood policies after Congress ups costs," A closer look at the numbers, Romano noted, paints a worrisome picture: residents of homes in exposed coastal areas appear to be holding onto their flood insurance, while inland residents at lower risk are dropping theirs. That could leave FEMA holding the bag for a higher-risk pool of properties, supported by a smaller base of low-risk policyholders.