A Second Disaster Strikes: Will FEMA Pay Again?

4 D I SAS T E R R ECOVE RY TODAY.COM the project worksheet preparation process. FEMA insurance staff then make determinations of “anticipated” proceeds from insurance that the applicant is likely to receive. These anticipated insurance proceeds are potential duplications of benefits that FEMA cannot fund under the law. This factor meant that anticipated insurance funds were applied to each project, reducing the amount of the grant award — in some cases to the level of a small project ($55,500 threshold in 2005) or zero. For one applicant this translated into $50 million in reductions for needed permanent projects before actual dollars were released for the rebuilding or replacement of the facilities, seriously inhibiting and delaying the applicant’s ability to recover. The insurance lessons of the Katrina disaster are all too clear: • Catastrophic disaster losses negatively affect the insurance marketplace for an indeterminate period of time resulting in problems of availability, the addition of new exclusions, increased deductibles and funds being withheld at the time of an applicant’s greatest need. • Obtain and maintain compliance may be impossible for applicants to achieve or at the very least can seriously strain their current and future operating budgets, leading to reductions in public service. • FEMA policies and procedures may delay or prevent Public Assistance grant funds from reaching applicants. • Failure to comply with the insurance requirements of FEMA’s Public Assistance Program may preclude an applicant’s critical facilities from receiving funding for any future disasters. The magnitude of the Katrina disaster may not be known for many years, nor will the final audits and closeouts be completed soon. We do know, however, that FEMA’s insurance requirements, particularly as they involve obtain and maintain provisions, will continue to be with us. LESSONS FROM 9/11 Until the 2005 Katrina disaster, the largest recent FEMA disaster had been the September 11th, 2001 terrorist attacks on the World Trade Center. By February 2002, the insurance implications of catastrophic disasters were given national attention and scrutiny by the testimony of then-New York State Superintendent of Insurance Gregory V. Serio, before the Subcommittee on Oversight and Investigations of the House of Representatives Committee on Financial Services.