November 14, 2012 / 8:26 PM / in 5 years

UPDATE 1-FEMA may seek flood insurance bailout after Sandy

* Expects Sandy claims up to $12 bln

* Borrowing capacity just under $3 bln

By Sarah N. Lynch

WASHINGTON, Nov 14 (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 faces Sandy-related claims of $6 billion to $12 billion, Edward Connor, FEMA’s deputy associate administrator for federal insurance, said at a meeting of the Federal Advisory Committee on Insurance.

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 the government has said the program will probably never be able to repay.

To extend the program’s borrowing capacity further would require authorization from Congress, something Connor said he expects the Homeland Security Department will request soon.

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