Flood Program Reform May Go Nowhere, Says Official

WASHINGTON--Congress may renew authorization for the National Flood Insurance Program to operate without adopting any reforms, a ranking federal official told state lawmakers meeting here.

Edward Pasterick, a senior aide in the Federal Emergency Management Agency's mitigation unit, said federal legislators may simply renew the existing program, which is due to expire Sept. 30, and delay a decision on making changes.

Mr. Pasterick, addressing the spring meeting of the National Conference of Insurance Legislators underway here, said it is entirely possible that Congress could decide to "just extend the current program and defer action on any other policies."

One of the problems that must be dealt with, he said, is customers who pay less than the actuarial rate for coverage, also known as the subsidy issue. "We are moving slowly on that, because it could affect a lot of people in rather adverse ways," he said.

The second issue is the huge, $17.3 billion loan the NFIP has outstanding with the Treasury, most of it stemming from paying losses from Hurricanes Rita and Katrina.

He said the agency generates an estimated $2.6 billion in premiums annually, but paid $176 million in interest to the Treasury in 2006, $718 million in 2007, and expects to pay $734 million in interest this year.

Waxing sardonic, Mr. Pasterick suggested the strongarm tactics displayed by a fictional television Mafia group might have to be employed, saying that a "plan to pay back that borrowing, or even a dent in it will probably have to involve the Sopranos family."

He noted that the agency looked at reinsurance in the 1990s as an alternative to borrowing from the Treasury, but the government Office of Management and Budget nixed that, saying the NFIP gets a far better deal from the Treasury.

The problem with borrowing from the Treasury, he said, is that after a while "you are going to get treated like a deadbeat brother-in-law."

And adding to the problem is that FEMA can't go about dealing with it in a "standard business way."

One of the reform measures under consideration, Senate bill S. 2284, calls for forgiving the debt in exchange for extension of a pilot program enabling the NFIP to better deal with severe repetitive loss structures that have incurred flood damage on more than one occasion.

The legislation was passed Oct. 17 but has been held up by Louisiana's senators, who fear that the mandate to charge actuarial rates on properties that have suffered more than one loss would make the program unaffordable to many Louisiana residents.