Combined with the impact of widespread flooding in the Midwest and elsewhere, Irene will lead the program to pay out more in claims than it will gain in premiums this year, said Robert Gordon, senior vice president of policy development and research for the Property Casualty Insurers Association of America. Private flood insurance plans, which are more of a specialty product, suffered more than $27 billion in losses so far this year, Gordon said; that figure could top $30 billion after Irene.
"It means this program is going to go deeper into debt," said Joshua Saks, water program specialist for the National Wildlife Federation, which has advocated for market-based reforms to the NFIP.
The NFIP is more than $18 billion in debt to the U.S. Treasury, a load that mostly dates to the impact of Hurricane Katrina in 2005. A reauthorization and reform bill passed by the House of Representatives does not address the debt; a discussion draft circulating in the Senate would wipe the debt clean.
The flood program has approximately 930,000 policies in force from North Carolina through Maine, according to statistics from FEMA, which oversees the NFIP.
The NFIP would not have deficit worries if it charged market rates and covered all who needed it, said Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies. "Any one of those states should have triple that, just from people who live on the coast," he said.
Due to its sheer size and unusual strength, Irene struck many property owners who never previously worried about flooding -- and consequently did not have insurance. "We had thousands of people who had no idea they were in a flood zone," Saks said.
In the aftermath, Irene has bolstered the case for reforms to FEMA, Grande said. The current program is set to expire Sept. 30. While a short-term extension is possible, many are wary of going that route given lapses in the program in the summer of 2010.
"It makes it harder for them to punt yet again," Grande said.
Still, obstacles remain. Disagreements run strong over what to do about the debt, the future of subsidies, new flood maps and the write your own program, Gordon said. "Irene will highlight a need for renewal, but it won't eliminate the obstacles to reform," he said.
Early estimates put the damage at roughly $2.6 billion in insured losses and as much as $7 billion in total economic losses, according to Kinetic Analysis Corp. Those losses come after a series of natural disasters this year that include dozens of tornadoes and an earthquake in Northern Virginia.
The damage caused by Irene adds to the $20 billion in insured losses that have already occurred this year, said Tom Larsen, senior vice president of Eqecat, a cat modeling company. Larsen said even though Irene had been expected to hit highly populated urban centers such as New York City and
New Jersey with much higher wind speeds than actually occurred, the breadth of the storm makes it difficult to put a cost figure on parts of the damage.