Hurricane Katrina could continue exacting a price on Mississippi’s gulf coast residents and businesses for generations to come through exorbitant flood insurance premiums, Mississippi Insurance Commissioner Mike Chaney says in explaining his bid to head off such an outcome by suing the federal government in the U.S. District Court for the Southern District of Mississippi.
The new rate structure contained in the Biggert-Waters Flood Insurance Reform Act of 2012 is designed to eventually eliminate federal subsidies and to pay down a deficit some media report to be $24 billion but Chaney puts at $28 billion.
The new rates kicked in on July 1 and will continue to reach increasing numbers of flood-zone property owners in the months and years ahead.
The deficit “was accumulated during Katrina,” Chaney said, when the Corps of Engineers used flood insurance money to cover losses caused by levee breaks.
“They need to wipe out the debt in a logical way,” he said of Congress, starting with getting control of administrative costs the insurance commissioner claimed eats up 40 percent of premium payments.
What isn’t used on administrative costs is swept out of the fund annually to pay off earlier losses instead of building up a reserve, according to Chaney.
Mississippi Business Journal