Monday, August 30, 2010

Reports: National Flood Insurance Program Unsound by Design

A USA TODAY article entitled "Huge losses put federal flood insurance plan in the red," reports that federal and local officials have failed to take steps urged by government reports, and that FEMA's (the Federal Emergency Management Agency's) National Flood Insurance Program has heavily subsidized people to live and businesses to develop in the nation's most flood-prone areas.  The National Flood Insurance Program insures 5.6 million properties nationwide.  And while the program's aim is to be self-sustaining by paying claims from premiums it collects, Congress' Government Accountability Office reported in April that the program is "by design, not actuarially sound" because it has no cash reserves to pay for catastrophes such as Katrina and sets rates that "do not reflect actual flood risk."

A USA TODAY analysis of FEMA data indicates that:
  • The number of claims paid through National Flood Insurance Program since 1978 is 1.3 million
  • The total cost of claims paid through National Flood Insurance program since 1978 is $38 billion, and
  • New Orleans, Louisiana is the community with the most claims (100,000 claims paying out $7.2 billion) during that time period

To read more about the USA TODAY analysis of the National Flood Insurance Program, along with a state-by-state breakdown of flood insurance claims against the fund, see the entire article here.

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