The National Flood Insurance Program is running out of
cash and the government has told insurance companies that it cannot authorize
payments beyond existing lines of credit.
In reaction, the Independent Insurance
Agents of America called for an immediate extension of
the program’s ability to raise money.
But insurance agents can still assess damages and make
payments to
The FEMA spokesman confirmed that the Independent
Insurance Agents and Brokers of America was correct in saying that
FEMA had distributed a memo to Write-Your-Own companies Friday informing them
that lines of credit were suspended until further Congressional action
regarding an extension of borrowing authority.
However, the FEMA spokesman said,
each company involved still had the authority to allow agents to write checks
pending the increase in that company’s line of credit, in other words, out of
its own pocket.
“Extending the borrowing authority is a matter of
immediate urgency,” said Charles E. Symington Jr.,
IIABA
senior vice president for government affairs and federal relations.
“We asked Congress to take this matter up as
expeditiously as possible, so that the NFIP can extend a line of credit to
Write-Your-Own companies for the payment of claims,” he said.
The issue is on the agenda for action tomorrow
by the
House Financial Services Committee, but the IIABA
request is
apparently designed to force Congress to move the bill through the rest of the
legislative process quickly.
It had been expected that action on flood insurance
issues would be taken up by the committee
tomorrow,
but final action would be delayed until after Congress returned from a
Thanksgiving recess in early December.
The decision of the IIABA
to
disclose the FEMA memo was made to accelerate action on increasing the line of
credit.
The IIABA said that, “With claims
expected to exceed $23 billion, extended borrowing authority is necessary in
order to meet consumer needs.”
The ability of Write-Your-Own companies to allow their
agents to assess claims and make payments to victims of recent hurricanes on
the
The initial borrowing limit of $1.5 billion from the
U.S. Treasury was extended by Congress in the immediate wake of Hurricanes
Katrina and Rita, but even this extension will be inadequate to meet the
anticipated claims.
“Given the catastrophic losses, Congress must act as quickly as possible in order to help consumers settle their claims and get on with their lives,” says Patrick O’Brien, IIABA director of federal government affairs.