NEW YORK (Reuters) - Two members of the Senate have revived the debate over the federal government’s flood insurance program, with one pushing to extend the program before it expires and the other demanding faster payment on existing claims.
The National Flood Insurance Program has survived for years on a series of last-minute annual extensions. The program has an unsustainable debt load after a post-Hurricane Katrina bailout, but reform efforts have repeatedly bogged down amid differences over how to handle that debt.
August’s Hurricane Irene, which produced massive flooding across the East Coast, was expected to give Congress a push to fix the program, which is virtually the only source of residential flood insurance in the country.
That did not happen, though, and as it stands the NFIP will expire December 16. The program has 5.57 million policies in force nationwide, insuring $1.25 trillion in property, which would remain in place even if it is not extended.
But if it expires, it will not be able to write new policies -- effectively making it impossible to get a mortgage on a home in high-risk flood areas.
With that in mind, Louisiana Republican David Vitter sent Senate Majority Leader Harry Reid a letter late Thursday urging the program be extended to September 30, 2012. It was a Vitter bill that got the program extended last year as well.
“Each time that the NFIP approaches its expiration date it causes a great deal of turmoil in the housing market because of the uncertainty surrounding the program,” Vitter said in the letter, a copy of which was posted to his website.
Reid’s office was not immediately available to comment on Friday.
At almost the same time that Vitter was pushing for the program to be extended, New York Democrat Chuck Schumer was pushing on the insurers that administer much of the program to pay claims more quickly.
In many cases private insurers act as brokers for the NFIP, selling the policies and administering the claims on behalf of the Federal Emergency Management Agency, which runs the program and ultimately makes the payments. Such companies are called “Write Your Own” vendors.
Schumer’s office said it had received data indicating insurers had processed 62 percent of the 14,500 claims they received on Irene and roughly half of the 3,150 claims from September’s Tropical Storm Lee.
“In order for FEMA to be responsive and put money on the ground, the private flood insurance firms must move more quickly to process and approve claims from those families and businesses that were harmed by these devastating storms,” Schumer said in a statement.
A spokeswoman for the largest “Write Your Own” NFIP broker, Fidelity National, said in many cases people were granted extensions of the claims window after both Irene and Lee, which meant insurers would need longer than the typical 60 days to process claims.
She added that Fidelity has not received a letter from Schumer, and that it has already closed 70 percent of its Irene claims.
Reporting By Ben Berkowitz; Editing by Gary Hill