FEMA may seek flood insurance bailout after Sandy
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(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 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, said at a meeting of the Federal Advisory Committee on Insurance.
"As we go into this, we are looking at Sandy and the numbers are staggering," Mr. 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.
To extend the program's borrowing capacity beyond the current $20.7 billion cap would require authorization from Congress, something Mr. Connor said he expects the Homeland Security Department will 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 that he expects 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," said Patty Templeton-Jones, chief operating officer of Wright Flood, in an email.
