The political and financial fallout from Superstorm Sandy will continue despite President Obama signing legislation on Sunday that will allow the National Flood Insurance Program to continue to pay claims.
For one thing, Northeast Senators are demanding prompt action on the $51 billion remaining on the aid package that the Senate passed Dec. 28 and the House declined to deal with late New Year’s Day. The House is scheduled to take up the remainder of the bill Jan. 15.
And in floor comments Friday, Rep. Jeb Hensarling, R-Texas, incoming chairman of the House Financial Services Committee, said the committee will take up legislation this year aimed at devising a transition to a private flood-insurance market.
Hensarling, however, did not provide a timetable on when the House FSC will take up the issue.
In his floor comments, Hensarling specified that his legislation will seek a “transition to a private, innovative, competitive, sustainable flood insurance market.”
He said the bill would serve to end unsustainable taxpayer bailouts once and for all.”
R Street Senior Fellow R.J. Lehmann responded by saying that while there will be challenges in moving to a fully private market for flood insurance, including development of appropriate underwriting and catastrophe modeling tools, flood risks already are privately insured in many other developed markets, including Australia and the United Kingdom.
“For decades, the NFIP has been offering below-market rates that have subsidized construction in risky and environmentally sensitive regions across the country,” Lehmann said. “Unwinding those distorted market signals in a way that causes minimal pain to existing home and business owners will be a challenging process, but one that is well worth exploring for the sake of both taxpayers and the environment.”
He adds, “The catastrophes we saw in 2012 should be a wake-up call that we simply can no longer afford to encourage people to live in harm's way. We welcome Chairman Hensarling's commitment to future flood insurance reform and would offer our own expertise for members of Congress seeking ways to make privatization a reality.”
The NFIP’s borrowing authority is now up to $30.425 billion, from $20.775 billion as a result of the relief bill passed last week.
Steve Harty, president and CEO of National Flood Services, Kalispell, Mont, which handles the back-office work for most Write-Your-Own insurance companies, said late Friday that his firm has “been burning the candle at both ends to keep up with the heavy volume of claims that have been generated by Hurricane Sandy.”
He said, “We are very pleased that Congress took action today that will provide the additional borrowing authority that will allow the NFIP to honor its contractual obligations. Surely the taxpayers and the policyholders across America expect and deserve nothing less.”
Officials of the Federal Emergency Management Agency, which administers the program, said payments on more than 115,000 claims in states across the country will now be processed as a result of congressional and presidential action.
Dave Miller, FEMA's associate administrator for the Federal Insurance and Mitigation Administration, said that, to date, nearly 140,000 claims have been made and $1.7 billion has been paid out for flood-related damages stemming from Sandy.
In asking the Senate to expedite passage of legislation Friday that raised the NFIP’s borrowing authority by one-third, Sen. Charles Schumer, D-N.Y., a member of the Senate Democratic leadership demanded prompt House action on the remainder of the $60.4 billion aid package passed by the Senate Dec. 28.
“We really had no choice but to pass this provision, because the federal government is obligated to reimburse when people have floods if they paid in their flood insurance,” Schumer said. “While this bill is important, it’s something we were almost obligated to do, and we should not have parades down the street because this bill has passed.”
Schumer said that the members of Congress from the Northeast, as well as governors from the states where Sandy hit, “are worried that the second major portion of this relief bill will not get through the House in the form that it should, so we need the House to pass not only the $9 billion that we have passed this morning, but the $51 billion that contains the bulk of the aid that people need, without which we will not be able to recover.”