Flood insurance program added to high-risk list

Government Accountability Office chief David Walker announced Wednesday that the agency has added the National Flood Insurance Program to the agency's list of high-risk federal programs.

"It is highly unlikely that the NFIP will generate sufficient revenues to repay funds borrowed from the Treasury to cover claims for the unprecedented magnitude and severity of flood losses resulting from hurricanes in 2005, as well as any exposure for future claims coverage in catastrophic loss years," Walker told a Senate Homeland Security and Governmental Affairs subcommittee (GAO-06-497T).

GAO has issued its high-risk list every two years since 1990. The inventory, which identifies areas susceptible to waste, fraud and abuse in the federal government, was last updated in January 2005 (GAO-05-207).

The federal Emergency Management Agency, which manages the NFIP, has estimated that Hurricanes Katrina, Rita, and Wilma will generate claims and associated payments of about $23 billion, a figure that far exceeds the total of about $15 billion in claims paid since NFIP was created in 1968.

FEMA's role in the flood insurance program largely involves providing financial and management oversight of the companies that run NFIP on a day-to-day basis. In October 2005, GAO reported (GAO-06-119) that FEMA faces several challenges in overseeing the 95 insurance companies and thousands of agents that sell flood insurance policies.

GAO also has reported (GAO-04-417) that serious hurdles stand in the way of FEMA's efforts to develop accurate digital flood maps, which builders and developers need to decide where to build.

The House Financial Services Committee was scheduled to mark up legislation Wednesday to revamp the flood insurance program. The bill would end subsidies for vacation homes and raise the cap on annual premium increases.