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
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
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 firstname.lastname@example.org or 202.857.5131