Posted by Jonathan J. Miller -Tuesday, September 13, 2011, 9:00 AM
Bloomberg Law’s Lee Pacchia interviews Randy Paar, partner at Kasowitz Benson Torres & Friedman LLP, talks about the market for flood insurance in the United States and business interruption insurance claims resulting from Hurricane Irene. I’m usually one of those people whose eyes glaze over when the topic of insurance is broached. This is not the case and this is an extremely informative interview.
This is an extremely timely interview given the flooding caused by Hurricane Irene along the Eastern coastline and especially inland. I don’t think many foresaw that there would be more flood damage caused by overfilled rivers and streams than from the ocean.
I wrote about flood insurance here on Matrix 6 years ago (42 years ago in blog/dog years). I’ve always marveled at the idea that the federal government was in the business of flood insurance at all. By keeping flood insurance premiums low, it has essentially encouraged more development in high risk areas and charge the same premiums for people who repeatedly file claims and those who don’t.
The program comes up for periodic renewal and FEMA is running out of money to fund it. Hurricane Katrina back in 2005 and the unusually high incidence of natural disasters in 2011 have drained their funds. If Congress does not provide funding, mortgage lending, 90% of which goes through Fannie Mae and Freddie Mac, may stop guaranteeing or purchasing mortgage paper from banks te housing market may stall in many regions.
Yet another challenge facing the housing market.