Federal flood insurance program has $700 million in cash for ...

Washington -- So, what's the status of the federal flood insurance program in light of what are likely to be robust claims filed by victims of Hurricane Sandy? Well, first of all the program is active. Congress this summer voted to extend the program for five years -- after a series of temporary extensions and some lapses over the last several years when new policies couldn't be issued.

But it is still $17 billion in debt -- almost all of it a result of claims paid out for hurricanes Katrina and Rita in 2005.

According to Steve Ellis of Taxpayers for Common Sense, the flood insurance program currently has about $700 million in cash on hand, and another $3 billion in borrowing authority.

Ironically, Congress, while approving the five-year extension with a provisions allowing premium increases of up to 20 percent per year to make the program more solvent, stripped one reform away at the last minute that Ellis says might might have helped Hurricane Sandy victims.?

That provision would have required more people in residual risk areas to purchase flood insurance. Ellis said some of those who were spared from the requirement to buy flood insurance might well now wish they had it when they learn the limits on FEMA emergency aid and Small Business Administration loans.

?Ellis and his group have been advocates for many years to reforming the flood insurance program to make it more self reliant and designed so it doesn't encourage development of homes in flood-prone areas, particularly along the coast.?

Sen. David Vitter, R-La., has pushed hard to extend the federal flood insurance program, saying that people, particularly in Louisiana, needed the assurance that the program would be there for them if they needed it.

The extension passed by Congress, and signed into law by President Barack Obama, has a provision by Sen. Roger Wicker, R-Miss., that requires use of scientific data to help determine whether damage is caused by flooding or wind. After Hurricane Katrina, many homeowners said their insurance carriers attributed damage to water, not wind, meaning that most, if not all, of the damage costs were applied to the federally supported flood insurance program. Wicker said his provision provides more objective data to determine which policies -- private wind coverage or federal flood insurance -- should apply.

Source: http://www.nola.com/politics/index.ssf/2012/11/federal_flood_insurance_progra_3.html

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