This federal program is already on shaky legs, but is facing even greater strains.
The National Flood Insurance Program has never recovered from falling into $18 billion of debt after Hurricane Katrina in 2005, and now it is headed back toward a position where its funds are running slim as the massive reconstruction effort after Sandy begin.
Estimates at this point are saying that the superstorm could lead to the second highest bill for the program.
Federal flood insurance claims will likely be second only to Katrina, as 115,000 have already been submitted, and thousands more continue to flow in with each passing day. Industry experts have estimated that the final total could be as high as $7 billion, at a time when the program is already only legally allowed to add a maximum of $3 billion to the debt in which it is already nearly drowning.
This summer, the flood insurance program was overhauled by Congress.
The new regulations permitted an increase in premiums for the owners of vacation homes as well as those that are in areas that are regularly affected by floods. However, critics are complaining that the flood insurance for these high risk areas should not be paid for by the taxpayers yet again. To comply with the demands of the critics, yet another massive reform to the program will need to occur, this time with potentially much larger and radical changes.
Representative Earl Blumenauer (D-Oregon) spoke of the flood insurance program by saying “We are now just throwing money to support something that is going to end up creating more victims and costing more money in the future”.
At the moment, approximately 5.7 million homes across the country that are located near rivers prone to flooding, or along the coasts, are covered by the National Flood Insurance Program. Critics have been saying that even with the new rules that have already been established for the coverage, it will take several years before policyholders will ever be paying premiums that will actually reflect what the coverage’s market cost will be. This, in combination with the program’s massive debt, make it difficult to build any reserves in case of future catastrophes.