Losses from Katrina will effect us all.

Losses from Hurricane Katrina are expected to be so sweeping the nation's flood insurance program will have to ask taxpayers for money to cover the costs.Claims filed under the National Flood Insurance Program could run as high as $20 billion, experts said.
The program collects only $1.85 billion a year in premiums, so the balance will have to come from somewhere else.The insurance program, a part of the Federal Emergency Management Agency under the Department of Homeland Security, has authority to tap the treasury for $1.5 billion, but that will not be enough.
The single costliest event in the program's history was Tropical storm Allison in 2001 at $1.27 billion. Claims from the 2004 hurricane season totalled $1 billion.Together, those won't compare to Katrina, said Ed Pasterick, with the National Flood Insurance Program."It's huge. It will be in the billions," he said.
The insured value, just for flooding, of homes and businesses across New Orleans alone amounts to $32 billion.To cope with anticipated claims, the flood program will have to borrow money from the U.S. Treasury or get Congress to give it to them. Either way, it will need a huge influx of cash to stay afloat in coming months.
Whatever happens, the insurance program will not go under."The government is not going to default on contracts they have with the public," Pasterick said. "The bottom line and the word we have to get out is that it doesn't matter the size of this, we will be able to pay the claims."Pasterick does not expect rates to increase.
Rates are set on average historical losses, he said. Katrina would raise that figure, but actuaries may throw it out because it skews the results.Before Katrina hit, the insurance program had about $100 million in reserves to pay claims.
In a typical year, the $1.85 billion in premiums more than covers its usual payout of about $800 million.Because Katrina's scope is unprecedented, the agency could be saddled with a debt four or five times greater than its net income.Bob Hunter is director of insurance for the Consumer Federation of America and the former Federal Insurance Administrator. He estimates Katrina will cost the flood insurance program between $10 billion and $20 billion.
For the first time in hurricane insurance history, he said, damage claims from flooding will exceed claims from wind.Floods have caused the nation's worst natural disasters in terms of lost lives and property damage, but only 10 to 15 percent of homeowners are insured for flooding, Hunter said.
In New Orleans, where everyone knows they are below sea-level, 50 to 60 percent of properties have flood insurance.In just four Louisiana parishes affected by flooding the insurance program has nearly 217,000 policies worth more than $32 billion in coverage."I think taxpayers will say we need to take care of people and we shouldn't walk away from people with insurance policies," Hunter said.
Still, New Orleans shouldn't be rebuilt until flooding risks are minimized, he said."Everybody knew there was the possibly of flooding, they just weren't expecting it up to the roofs," he said.
And the government didn't invest in fixing the problem, Hunter said."It was not an unknown risk," he said, "but the money is being spent in Iraq and places like this instead."Erin Stawski, 39, said she's angry with the federal government for ignoring pleas to fix southern Louisiana before a catastrophe struck.
"They knew what would happen if we had a big storm," she said, speaking from a Fort Myers home where she and her family have taken refuge.Now the woman from Chalmette, La., southeast of New Orleans, has a house with three to five feet of water. She was told the home was not in a flood zone, so she doesn't carry flood insurance.
"We were hoping FEMA would help us, but we have to call the SBA and get a low interest loan from them," Stawski said.As bad as conditions are in New Orleans, it's not the only disaster scenario that can hit the flood insurance program, said David Conrad, a water resource specialist for the National Wildlife Federation.Metropolitan areas in Florida, Texas and the Mid-Atlantic also are in danger of wide-spread and devastating floods.
Conrad said he hopes Katrina will lead to more discussion about how to lessen storm dangers and manage development and redevelopment."What we're learning from these major storms is that it's so important to rebuild right," he said.
The flood insurance program requires new buildings and development to reduce the potential for property damage, said J. Fletcher Willey, owner of the Willey Agency in Nags Head, N.C. He's a member of an advisory committee to the Federal Emergency Management Agency."Flood insurance is a good thing and flood plain management is a good thing, but you have to have both," he said.Everyone is at risk for a flood, he said, so taxpayers needn't gripe about having to foot the bill for New Orleans, Mississippi and Alabama.
"Floods happen everywhere," he said. "They happen in Fargo, North Dakota, or in Pennsylvania, along the Mississippi and in downtown Chicago."The federal government got into the flood-insurance business in 1968 because private insurers refused to provide coverage.
That left FEMA to bail out property owners, and with its own insurance company, the government could pay claims using premiums it collected.People who own property in a flood zone and have a mortgage are required to carry the insurance. The program has grown to include 4.6 million properties, making it the biggest single-peril insurer in the world.About 1.85 million of those insurance policies, 40 percent, are in Florida.
Although people buy and pay for flood insurance through a private insurance company, the National Flood Insurance Program provides the coverage.The national program pays a commission to private insurers.
Last year, those commissions totaled $600 million on $1.85 billion in premiums. With $1.25 billion in claims and $165 million in administrative costs, the program had to borrow $200 million from the treasury.One question is whether borrowing to cover short-falls is a good strategy or whether a reserve fund is needed.Larry Larson, of the Association of State Flood Plain Managers, said he would like Congress to authorize the flood insurance program to build up a higher catastrophe fund.
"Everyone might pay $5 a year and over 20 years it would build to a $400 million fund," Larson said.But when the flood program goes through years with below normal claims and builds up reserves, Congress starts to question whether premiums should be lower, he said.
The agency can't win, he said:"They're damned if they do, and they're damned if they don't."