Atlantic superstorm Sandy may be the third most expensive on record for the U.S. government’s flood insurance program, having struck a region with the heaviest concentration of federal flood coverage outside of the Gulf Coast.
The BGOV Barometer shows New York and New Jersey, the states hit hardest by the storm, have almost $100 billion in flood insurance between them. New Jersey alone has $54.5 billion, exceeded only by Florida, Texas, Louisiana and California, according to figures from the Federal Emergency Management Agency.
Flood-loss claims from Sandy might cost the government program $2 billion, with two-thirds coming from New York and New Jersey, according to an estimate from Kinetic Analysis Corp., a hazard-research company based in Silver Spring, Maryland. The flood losses covered by the subsidized program are on top of $6.6 billion in insured losses that Kinetic Analysis projects for storm damage, cleanup and business interruption costs, primarily from causes other than flooding, such as wind.
Sandy’s projected costs to the flood-insurance program would be exceeded only by two Gulf Coast storms, Hurricane Katrina in 2005 and Hurricane Ike in 2008.
The clusters of flood coverage under the federal program underscore the difficulty the government faces in trying to spread risk as widely as possible to keep costs down, said Jonathan Adams, an insurance analyst with Bloomberg Industries.
“The distribution among those who need it is pretty thorough,” Adams said. “The distribution among those who may not need it isn’t as thorough.”
The flood insurance program is still struggling with debt incurred paying claims from Hurricane Katrina. Congress voted earlier this year to extend flood insurance for five years and allow for higher premiums.
Funding to pay claims from superstorm Sandy shouldn’t be a problem, said George Haddow, who was FEMA’s deputy chief of staff under President Bill Clinton.
FEMA, part of the Department of Homeland Security, has “the capability to borrow money from Treasury,” Haddow said.
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