The federal flood insurance agency, currently broke because of hurricane-related claims, will be able to resume payments to flood victims following a vote by Congress to increase its borrowing powers.
The Senate and the House on Friday both approved by voice vote legislation that raises to $18.5 billion the amount the National Flood Insurance Program can borrow from the Treasury every year. In September, Congress voted to raise the borrowing authority from $1.5 billion to $3.5 billion.
Butch Kinerney, spokesman for the Federal Emergency Management Agency, the NFIP’s parent agency, said insurers have been told to stop paying claims because the program has run out of money. “We are in a holding pattern to see what happens next,” he said.
House Financial Services Committee Chairman Mike Oxley, R-Ohio, cautioned that claimants could “initiate legal actions against FEMA and the United States government if we do not act now.”
Kinerney said current estimates are that there will be $23 billion in claims from hurricanes Katrina, Rita and Wilma. He said there have been more than 204,000 claims from Katrina, 13,000 from Rita and 12,000 from Wilma.
The previous record for most expensive flood disaster came with Hurricane Ivan last year, when there were 28,000 claims costing $1.4 billion.
Rep. Mike Fitzpatrick, R-Pa., sponsor of the legislation, noted that the $23 billion was more than the total amount paid out in claims by the NFIP since its inception in 1968.
The House earlier last week voted to increase the borrowing authority to $8.5 billion, but the Senate on Friday increased that to $18.5 billion, classifying the extra money as emergency spending. The House later approved that level.
The flood program currently covers around 4.5 million policyholders in more than 20,000 communities in flood plains and other low-lying areas. Communities that participate in the program must regulate new construction with stricter building codes and take other steps to reduce losses from future floods.