National Flood Insurance Program: Treasury Borrowing in the Aftermath of Hurricane Katrina [September 19, 2008] [open pdf - 70KB]
"In 2008, Hurricanes Ike, Gustav and Dolly made landfall in the United States, causing widespread flood damages. Estimates of federal flood losses from these three storms are not yet known. Exactly three years earlier, claims and expenses related to the massive flooding caused by Hurricanes Katrina, Rita, and Wilma (KRW) had financially overwhelmed the National Flood Insurance Program (NFIP). The program was selfsupporting from 1986 until 2005, covering all expenses and claim payments out of cash flow of policy premiums and fees. The Federal Emergency Management Agency (FEMA), the agency that administers the NFIP, paid $19.28 billion in KRW-related claims as a result of the 2005 Gulf Coast hurricanes. This amount exceeds the $2.2 billion in premiums earned annually and its $1.5 billion borrowing authority from the U.S. Treasury. As a result of the catastrophic property losses under the NFIP from KRW, in September 2005, the Congress passed and the President signed into law legislation to increase NFIP borrowing authority first to $3.5 billion (P.L. 109-65) and then to $18.5 billion (P.L. 109-106) in November 21, 2005, and finally to $20.775 billion (P.L. 109-208) on March 23, 2006, to allow the agency to continue to pay claims. FEMA estimates that the NFIP will need about $3 billion in additional borrowing authority to cover the claims currently outstanding and a yet to be determined amount for the 2008 hurricanes. Under current law, funds borrowed from the Treasury must be repaid."
CRS Report for Congress, RS22394