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Absent From Flood Debate: How to Fund Mega-Events

Lawmakers’ proposals to reauthorize the National Flood Insurance Program largely don’t address how to fund the costliest part of the program: payouts from big disasters like Hurricane Katrina and Superstorm Sandy, an actuary told Bloomberg BNA...
June 28, 2017

Katrina

Lawmakers’ proposals to reauthorize the National Flood Insurance Program largely don’t address how to fund the costliest part of the program: payouts from big disasters like Hurricane Katrina and Superstorm Sandy, an actuary told Bloomberg BNA.

“A key issue facing the NFIP is how future mega-events like Katrina and Sandy will be funded, in addition to how the current accumulated debt can be retired,” Rade Musulin, vice president of casualty issues for the American Academy of Actuaries, told Bloomberg BNA in an email ahead of a congressional briefing held by the academy’s Flood Insurance Work Group.

The NFIP’s debt has spiked after major disasters, and the program now owes the Treasury $24.6 billion, with no way to repay it under the current income structure. “The expectation that all losses from past and future mega-events will be repaid out of the NFIP’s cash flow under reasonable future loss scenarios is not realistic,” Musulin said.

At the briefing, Nancy Watkins, a member of the academy’s Flood Insurance Work Group and a principal and consulting actuary with the firm Milliman Inc., told congressional staffers that the NFIP was largely able to cover its losses for decades until Katrina hit in 2005.

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