Panel criticizes FEMA's handling of flood insurance program

The Federal Emergency Management Agency's handling of the National Flood Insurance Program drew sharp criticism Tuesday from Senate Banking Committee members, who said FEMA has yet to implement provisions of a program overhaul enacted nearly 16 months ago.

"Regrettably, I have had experience dealing with FEMA and the National Flood Insurance Program over the past two years, and given these interactions, I am very deeply concerned about FEMA's ability to handle not only flood insurance claims, but the other needs of the people affected by Hurricanes Katrina and Rita," Banking ranking member Paul Sarbanes, D-Md., said during a hearing.

David Maurstad, FEMA's acting Mitigation Division director and federal insurance administrator, said NFIP claims resulting from Hurricanes Katrina and Rita could exceed $22 billion, which would surpass the total amount of NFIP claims paid out since the program was created 37 years ago.

"We not only have a legal obligation to honor our commitments, but we have a moral obligation to provide the coverage we've promised to provide," Maurstad said.

But Sarbanes said many Maryland residents are still reeling from the effects of Hurricane Isabel -- which struck in 2003 -- and some have sued FEMA over their flood insurance settlements. "FEMA was clearly overwhelmed then, let alone now," Sarbanes said.

Sarbanes and Banking Economic Policy Subcommittee Chairman Jim Bunning, R-Ky., said FEMA has not implemented several provisions enacted as part of last year's NFIP reauthorization in response to problems that emerged after Isabel. One of those provisions required FEMA to establish, by Dec. 30, 2004, a process for flood insurance policyholders to appeal claims decisions.

Maurstad said FEMA is working "diligently" to implement a formal appeals process, but did not specify when it would be finished.