Washington==The Bush administration has asked Congress to provide the National Flood Insurance Program (NFIP) with only about one-third of the money needed to pay claims in an effort to push reforms of the program.
The House Financial Services Committee is scheduled to vote Thursday on whether to raise the NFIP's borrowing authority from $3.5 billion to $8.5 billion. Industry officials say that is the amount proposed by the Office of Management and Budget, an agency that reports directly to the White House.
This is only about one-third of what the program's administrator told the Senate Banking Committee is the potential $22 billion cost of claims to the NFIP resulting from Hurricanes Katrina and Rita.
At the same time, the legislation raising the borrowing authority was approved by unanimous consent by the Senate Banking Committee Monday and is now awaiting action on the Senate floor, according to a staff official of the Senate Banking Committee. The legislation could be approved in the Senate some time this week, the aide said.
The borrowing issue is of concern to the insurance industry because officials fear that the agency would run out of money even with the increase in borrowing authority before Congress returns to work in January.
But Edward Pasterick, a senior advisor to the NFIP and an official of the parent Federal Emergency Management Agency, said the new authorization is only a stop-gap measure, providing funds until FEMA and the NFIP can implement reforms needed to reduce future losses.
FEMA, now a part of the Homeland Security Department, was required to implement the reforms under the 2004 NFIP reauthorization law, but was heavily criticized at last week's Senate hearings because it had yet to do so.
"We are working on those issues now," Mr. Pasterick said. "Congress and the administration want to show concrete progress toward implementing reforms that will reduce flood losses in the future, and we hope to have these in place within four to five weeks."
After that work is done, the administration will likely ask Congress to approve additional funds, Mr. Pasterick said.
A key program the agency is working on is dealing "with the subset of properties that are damaged repeatedly," Mr. Pasterick said. "So, we are looking at programs whereby we can either improve them to make them withstand further storms or buy out the people who are willing to move."
Mr. Pasterick said that is just one example of how the agency is working to improve itself. It is also looking to streamline and reduce the cost of the claims process, and set up a system to work with communities to establish zoning and other laws to keep properties from being built in areas likely to flood, seeing that buildings are rebuilt stronger to withstand future hurricanes, as well as providing funds to bring homes in potential flood areas up to existing flood-related building codes.
These issues were raised in the testimony of the General Accountability Office before the Senate Banking Committee last week. William Jenkins, GAO director of homeland security and justice issues, said the financial viability of the federal flood insurance program is threatened because the agency does not collect sufficient premiums to build reserves necessary for meeting long-term flood loss claims.
He said that while FEMA has kept the program on a sound financial footing so far, the catastrophic flooding of 2004 required the program to borrow $300 million from the Treasury to meet claims.
Properties that suffered repeated losses but pay subsidized insurance rates constitute 1 percent of all lands insured under the NFIP, but account for 25 to 30 percent of all losses, Mr. Jenkins said.
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