FEMA may seek flood insurance bailout after Sandy

WASHINGTON Wed Nov 14, 2012 5:23pm EST

1 of 2. Bicycles lay partially submerged in seawater in what used to be the basement of a home swept away by flooding from Hurricane Sandy in the Oakwood Beach neighborhood of Staten Island in New York City, November 13, 2012.

Credit: Reuters/Mike Segar

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WASHINGTON (Reuters) - The Federal Emergency Management Agency will probably need to request a congressional bailout of its flood insurance operations, as claims from superstorm Sandy could be as much as four times greater than the program's capacity, a top FEMA official said on Wednesday.

The National Flood Insurance Program, a FEMA subsidiary, has $2.9 billion in borrowing capacity but expects Sandy-related losses of $6 billion to $12 billion, Edward Connor, FEMA's deputy associate administrator for federal insurance, told a meeting of the Federal Advisory Committee on Insurance.

"As we go into this, we are looking at Sandy and the numbers are staggering," Connor said.

The NFIP is essentially the country's only flood insurer for residential properties. It received a bailout after Hurricane Katrina in 2005, leaving it with a debt load of just under $18 billion, an amount the government has said the program will probably never be able to repay.

A reform package signed into law this year is expected to improve the program's finances eventually, although such changes are years away and have been criticized as insufficient by elements of the insurance industry.

For now, extending the program's borrowing capacity beyond the current $20.7 billion cap would require authorization from Congress, something Connor said he expected the Homeland Security Department would request soon.

"In terms of when we will borrow, we know that with the way the claims are coming in now, the burn rate, that we expect that probably by the end of this month we are going to have to tap into our remaining $2.9 billion to pay the claims," he said.

He said he expected Homeland Security Secretary Janet Napolitano to appear before Congress to request additional borrowing power.

While the NFIP is a government program, it contracts with private insurers to write and administer many of the policies on its behalf. A senior executive of the largest such underwriter said she fully expected Congress would allocate the necessary funds.

"We can't speculate on the final dollar outcome, but obviously FEMA has made a stance," Patty Templeton-Jones, chief operating officer of Wright Flood, said in an email.

Between the losses to private insurers and to the federal government, Sandy is expected to be the second costliest natural catastrophe in U.S. history, behind only Katrina. Disaster modeling company RMS said on Wednesday it expected insured losses of as much as $25 billion.

(Writing By Ben Berkowitz; Editing by Phil Barbara and Peter Cooney)

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Comments (2)
gregbrew56 wrote:
Well, there goes the premium on my flood insurance. What I don’t get is why I pay the same rate per dollar valuation of the property as someone who lives on a beach? I object to subsidizing someone else’s poor choice of living in flood-prone areas. My property is on the fringes of a 100 year flood zone. Some of those places in Jersey could get flooded every decade.

If this makes ME angry, I can’t imagine the chagrin of other taxpayers who don’t live anywhere near a flood zone subsidizing luxury homes 50 feet from the mean high-tide line.

Nov 14, 2012 4:49pm EST  --  Report as abuse
bobber1956 wrote:
Nope, can not do it. We are out of money. Have to go somewhere else-ask the guy that did so much to help you out during the flood, you now the one you voted for. He is rich.

Nov 14, 2012 4:57pm EST  --  Report as abuse
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