Post Date January 23, 2014 –  Super Storm Sandy has put the U.S. Flood Insurance Program in a world of hurt.  This is nothing new.  The Flood Insurance Program has been in trouble on numerous times in the last two decades.  Just like every program the U.S. Government  supports – it does not work correctly.  Sadly; Super Storm Sandy was such devistating  the stress the storm will put on the whole system.  It will definitely test the feasibility and sustainability of the United States’ National Flood Insurance Program.

Flood Insurance Program will continue to need periodic bailouts

The Flood program had earlier plunged deep into debt in 2005 as Hurricane Katrina brought $17.7 billion in claims. And with Sandy being considered to have the second-worst insured flood loss in the history of the U.S (second to Katrina), the flood insurance program’s viability is unclear whether it can suffice to the magnitude of claims post-Sandy.

The question now is whether the program can withstand the claims or will the claims exceed $3.7 billion – the amount which the National Flood Insurance Program can exhaust at the moment.
The flood program has been plagued with debts as its premiums was not able to cover the amount of claims brought by previous floods, especially those cause by severe hurricanes in 2004 and 2005.

However, the largest insurance provider for the flood program believes that it is still too early to say whether Sandy’s damages will go over the program’s financial capacity. Patty Templeton – Jones, Wright Flood’s chief operating officer said that today’s average Sandy claims are at 3,000 a day.

The flood insurance program
Standard homeowner’s insurance coverage does not cover damages from flood. To be covered on such disaster, a homeowner must avail of the government’s National Flood Insurance Program (NFIP). The NFIP started in 1968 to provide homeowners with affordable flood insurance.

Today, there are 80 Homeowners Insurance companies which market, sell and collect flood insurance premiums in behalf of the federal government for a fee. The insurance premiums then go to the Federal Emergency Management Agency (FEMA). FEMA has claims from  80,000 Flood Insurance Policies.