A significant factor in the decision about where to build a house, business or other structure is the availability of property insurance. With the onset of the National Flood Insurance Plans (NFIP) in 1968, people began to build on property that had been thought to be uninsurable because of the high premiums charged by private insurers.  With low cost insurance available, people built on property that had a higher probability of flood damage. Through the Federal Emergency Management Agency (FEMA),  FIRM maps  (flood insurance rate map) were created by NFIP for areas where there was any risk of flooding, even it might be classified as a "hundred year flood" (one chance of a flood in 100 years). New construction on one of the flood-plains had to meet a set of criteria before insurance could be purchsed.

    What was the impact of the availability of this insurance on the communities at risk for flooding? In the ten years before the availability of federal flood insurance, 186 deaths were reported from floods, with $2.2 billion in damages. In the ten years following the start of the federal flood insurance program there were 411 deaths reported from floods, with $4.7 billion in damages. (Savadove, p.178) What conclusion can be drawn from such a statistic? Discussion of this has lead to the understanding that the availability of flood insurance has indirectly encouraged people to build homes and businesses in areas that should not be used for those purposes.

    Similar concerns about insurability of areas at risk from hurricanes and earthquakes have been raised. If a natural catastrophe hits an unpopulated area, there is a feeling that no real harm has been done, nature is at work as it has been forever. However, if a natural disaster hits a community and there is injury, death and property damage, it had to have been preceeded by human decisions to develop in that hazard prone area.(Godschalk, p. 5)

    Today, the federal government is trying to spread the burden of catastrophic insurance risk. This means that private insurers are once more becoming part of the flood insurance picture. Reinsurance policies, private insurance pools, off-shore insurance purchases and trading options on a catastrophe index at the Chicago Board of Trade are some of the different approaches being taken to spread out the expense associated with paying for catastrophic insurance for floods and other natural disasters. (see Insurance Services Office, Inc. for more information.)
 

Natural disasters are a "growth" industry. Since the 1960s, economic losses from natural
disasters on a global scale have tripled, while insured losses have quintupled. (after Berz,
1992, Natural Hazards, 5, 95-102)