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Irene May Cause NFIP to Overflow Its Bank

Hurricane Irene not only left a trail of damage up and down the East Coast, it struck a blow to the fiscal strength of the National Flood Insurance Program.
The U.S. Federal Emergency Management Agency is not yet prepared to estimate the number of claims or their aggregate value. However, the program is certain to crest above its fiscal banks, insurance industry experts say.
Combined with the impact of widespread flooding in the Midwest and elsewhere, Irene will lead the program to pay out more in claims than it will gain in premiums this year, said Robert Gordon, senior vice president of policy development and research for the Property Casualty Insurers Association of America. Private flood insurance plans, which are more of a specialty product, suffered more than $27 billion in losses so far this year, Gordon said; that figure could top $30 billion after Irene.
“It means this program is going to go deeper into debt,” said Joshua Saks, water program specialist for the National Wildlife Federation, which has advocated for market-based reforms to the NFIP.
The NFIP is more than $18 billion in debt to the U.S. Treasury, a load that mostly dates to the impact of Hurricane Katrina in 2005. A reauthorization and reform bill passed by the House of Representatives does not address the debt; a discussion draft circulating in the Senate would wipe the debt clean (Best’s News Service, July 19, 2011).

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