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FEMA Chief Sees Bigger Role for Insurers in Flood Coverage

Congress should consider encouraging private insurance companies to provide coverage beyond the current limits set by the National Flood Insurance Program, the administrator of the Federal Emergency Management Agency told lawmakers Thursday.

Craig Fugate told the Senate Banking Committee that he agrees with Sen. David Vitter, R-La, that limits in coverage, last raised in 1994, should be adjusted upward.

But Fugate said that allowing the federal government to provide a "basic level" of coverage, and then turning over larger coverage amounts to private insurance companies, might be a way to prevent the national program, run by his agency, from going further into deficit.

The program is now $17 billion in debt, mostly from claims paid out after Hurricanes Katrina and Rita in 2005.

The Senate Banking Committee held its hearing to examine ways to reauthorize the National Flood Insurance Program for five years.

Because of the inability of the House and Senate to concur on a "reform package," the program has been authorized for short periods of time.

The program authorization lapsed four separate times last year, and, according to data compiled by Vitter, caused 47,000 house closings to be delayed or canceled. Flood insurance is mandatory in flood-prone communities.

"Reauthorization or extensions in tiny increments has really not served our communities and the economy well," Vitter said.

On May 12, the House Financial Services Committee approved a five-year reauthorization of the flood insurance program. The measure could be on the House floor in the next few weeks. It would raise the limit on annual rate increases from 10 percent to 20 percent.

Fugate said Thursday that his agency should be allowed to collect rates that actually reflect the risk of flood insurance payouts, though he said the administration is sensitive to not wanting to raise rates beyond the ability of people to pay. Certainly, he said, people who can afford to ought not to receive subsidized flood insurance rates.

The House bill would allow for increases in coverage, now limited to $250,000 to residential structures, to reflect the rate of inflation.

But unlike similar bills passed by the Democratic-controlled House over the previous two years, the bill doesn't include an expansion of the program to include wind coverage. Former Rep. Gene Taylor, D-Miss., whose home was destroyed by Hurricane Katrina, had pushed for the expanded coverage, arguing private carriers unfairly blamed hurricane damage on water, not wind, and passed on almost the entire liability for hurricane claims to the National Flood Insurance Program.

But Taylor was swept out of office as the GOP recaptured the House in the 2010 elections. And with Fugate and others warning wind coverage would add additional deficits to the flood insurance program, the provision appears unlikely to get any traction this year.

The National Flood Insurance Program, which was authorized by Congress in 1968, now provides 5.6 million policies providing $1.2 trillion in coverage.

Fugate, a former Florida emergency services director, generally won praise from senators for his stewardship of FEMA and the flood insurance program.

But Sen. Robert Menendez, D-N.J., chided Fugate after the Obama administration turned down New Jersey Gov. Chris Christi's request for a disaster declaration after recent spring flooding. The White House said that uninsured damage was minimal.

Menendez said the decision represents a "perverse disincentive," against homeowners doing the responsible thing and getting flood insurance because that will only end up punishing the state when it seeks the grants and assistance provided by a presidential disaster declaration.

By Bruce Alpert, Times-Picayune

Bruce Alpert can be reached at balpert@timespicayune.com or 202.857.5131

Thanks to Our 2024 PIA Partners:
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