WASHINGTON — Already strapped from last year's four hurricanes in Florida, the National Flood Insurance Program is expected to go even deeper into the red to cover losses from Hurricane Katrina.
"We'll be borrowing fairly quickly," said Ed Pasterick, a senior advisor in the Federal Emergency Management Agency's mitigation division, which manages the insurance program
The program currently has about $100 million available to pay claims, but is facing a $200 million loan payment soon to cover last year's losses, Pasterick said.
Normally, the flood insurance program can borrow up to $1.5 billion from the federal Treasury, but Congress increased that level to $3.5 billion this month as part of its Katrina relief package.
As bad as Katrina and the subsequent flooding in New Orleans were, the federal flood program could have been hit a lot harder if the storm had struck farther east along the heavily insured Florida Panhandle or farther west around the heavily insured Houston area.
FEMA estimates there were about 217,000 flood policies in the affected areas of Louisiana and 27,000 each in the affected areas of Mississippi and Alabama. That's about 58 percent of the policies written for the three states, which had a total value of about $65 billion.
Nationwide, there are about 4.6 million policies in effect with a value of $785 billion.
It's too soon to know how many claims will be filed from the Katrina-affected areas or how extensive the losses will be, Pasterick said, but the government estimates the losses will be about $2 billion, or about two-and-a-half times as much as the average annual nationwide flood insurance loss of $800 million.
"This storm obviously is off the chart compared to our previous experience," Pasterick said.
The impact of this year's high claims is likely to be reflected in future rate hikes for federal flood coverage, but by law rates cannot increase more than 10 percent from one year to the next.
Not all of the properties damaged by the flooding were federally insured, Pasterick noted. Many of the hardest-hit areas had a substantial amount of public housing, which is often self-insured by local housing authorities.
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