* Expects Sandy losses up to $12 bln
* Borrowing capacity just under $3 bln
* Will have to tap remaining capacity this month
By Sarah N. Lynch
WASHINGTON, Nov 14 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
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
"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.