As Congress races to beat a Sept. 30th deadline to reauthorize the national flood insurance program, FEMA administrator Craig Fugate told U.S. senators Thursday that he would like the private insurance industry to participate in the debt-ridden program, now $18 billion in the red.
Testifying before the U.S. Banking, Housing and Urban Affairs Committee, Fugate said that under the program’s current federal structure “it is unlikely we can reduce the $18 billion debt.”
Fugate warned that the “high volumes” of risk from catastrophes like Hurricane Katrina saddle the federal government with the financial responsibility. “This risk should be better shared with the private sector,” he said, “rather than looking at strictly a government program.”
The FEMA chief, who administers the federal flood insurance program, said he envisioned the continuation of a federal share of the plan, especially for low income households, while making the system “more actuarially based.”
“I’m not opposed to the private sector buying the least risky policies,” Fugate said.
“We have got to have the private sector more engaged in the program.”
Several lawmakers agreed with Fugate, notably Sen. Richard Shelby, R-Ala., the ranking member.
Sen. Roger Wicker, R-Miss., a member of the panel, testified, as well, Thursday, telling his colleagues that it was urgent that flood insurance be reauthorized by the deadline so as not to hurt the real estate market – homes in flood areas cannot close without flood insurance policies. Last year the program lapsed three times and had several short-term fixes before the Senate authorized a one-year extension.
“Another program lapse is entirely avoidable, and we should not allow that to happen,” said Wicker. He made a strong push for his legislation, the Consumer Option for an Alternative System to Allocate Losses, to use increased data collected by NOAA during the claims process, which he argued is part of the solution to the wind versus water dispute problem that has rocked the Coast since Katrina. Residents found insurers denying wind damage claims but eager to pay federal flood insurance claims from policies they administered.
Wicker, who held a roundtable with Coast residents last year on flood insurance, said, “There is no question that one of the most difficult obstacles in recovering from Hurricane Katrina – or preparing for the next storm – has been the cost and availability of insurance.”
Banking Committee Chairman Tim Johnson, D-S.D., said in his opening statement, “This program, which provides over $1.2 trillion in coverage, needs certainty. It is my hope to provide this through a long-term extension.”
The U.S. House Financial Services Committee approved a five year reauthorization bill. The U.S. House is expected to consider the bill shortly.