The damage wrought by Hurricane Irene may be more than original estimated. Though the storm was not quite as powerful as has been predicted, it brought major floods to much of the East Coast. Given the scarcity of flood insurance amongst homeowners, many sought refuge from the National Flood Insurance Program (NFIP). The program has been on unsure financial footing for several months, however, being billions of dollars in debt. The program is meant to offer insurance coverage to homeowners that cannot receive such coverage through private insurance companies, yet has failed to help them recover from disastrous events due to lack of funds.
In Irene’s wake, NFIP is again straddled with the burden of aiding those that have been displaced by flooding. Due to the massive debt amassed by the program, however, it is unlikely that homeowners will receive timely payouts as the future of the program becomes murky. FEMA, the agency responsible for NFIP, is being tasked with solving the problems with the program.
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Reforming the entirety of the federal program is no small feat. Several industry analysts have proposed raising the rates of coverage offered by the program, but such a move would have to be approved by state insurance regulators. If NFIP’s insurance rates grow, private insurance companies will also seek the same treatment as they will be forced to compete with the program. Such rate increases would have to be quite high to offset the debt of the program.
Whatever course FEMA takes will likely result in a legal battle between the federal agency and consumers who had once been protected by the dubious program.