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entitled 'National Flood Insurance Program: Preliminary Views on FEMA's 
Ability to Ensure Accurate Payments on Hurricane-Damaged Properties' 
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Testimony: 

Before the Subcommittee on Oversight and Investigations, Committee on 
Financial Services, and the Subcommittee on Management, Investigations, 
and Oversight, Committee on Homeland Security, House of 
Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 2:30 p.m. EDT: 

Tuesday, June 12, 2007: 

National Flood Insurance Program: 

Preliminary Views on FEMA's Ability to Ensure Accurate Payments on 
Hurricane-Damaged Properties: 

Statement of Orice M. Williams, Director: 
Financial Markets and Community Investment: 

GAO-07-991T: 

GAO Highlights: 

Highlights of GAO-07-991T, a testimony before the Subcommittee on 
Oversight and Investigations, Committee on Financial Services, and the 
Subcommittee on Management, Investigations, and Oversight, Committee on 
Homeland Security, House of Representatives 

Why GAO Did This Study: 

Disputes between policyholders and property-casualty insurers over 
coverage from the 2005 hurricane season highlight challenges in 
determining the appropriateness of claims for multiple-peril events. In 
particular, events such as hurricanes that can cause both wind and 
flood damages raise questions about the adequacy of steps taken by the 
Federal Emergency Management Agency (FEMA) to ensure that claims paid 
by the National Flood Insurance Program (NFIP) covered only damages 
caused by flooding. 

As a result, the Subcommittees asked GAO to provide preliminary views 
on (1) the information available to and obtained by NFIP through its 
claims process in determining flood damages for properties that 
sustained both wind and flood damages, and (2) the information 
collected by FEMA as part of the NFIP claims reinspection process. 

GAO collected data from FEMA, reviewed reinspection reports, reviewed 
relevant policies and procedures, and interviewed agency officials and 
others knowledgeable about NFIP. 

What GAO Found: 

NFIP does not collect and analyze both wind and flood damage claims 
data in a systematic fashion, which may limit FEMA’s ability to assess 
whether flood payments on hurricane-damaged properties are accurate. 
Instead, NFIP focuses only on the flood claims data to determine 
whether the amount actually paid on a claim reflects the damages caused 
by flooding. Flood claims data, collected by NFIP through the write-
your-own (WYO) insurers—including those that sell and service both the 
wind and flood policies—do not include information on total damages to 
the property from all perils. That is, NFIP does not systematically 
collect information on wind damages from the WYO insurer when a flood 
claim is received. FEMA officials state that they do not have authority 
to collect wind damage claims data from WYO insurers, even when the 
insurer services both the wind and flood policies on the same property. 
As a result, for hurricane-damaged properties, such as those damaged by 
Hurricanes Katrina and Rita, NFIP does not have all the information it 
needs to ensure that its claims payments were limited to damage caused 
by flooding. Concerns over the processing of these flood claims are 
heightened when the same insurance company serves as both NFIP’s WYO 
insurer and the property-casualty (wind) insurer for a given property. 
In such cases, the same company is responsible for determining damages 
and losses to itself and to NFIP, creating a potential conflict of 
interest. 

The lack of both flood and wind damage data also limits the usefulness 
of FEMA’s quality assurance reinspection program for NFIP flood claims. 
GAO found that the NFIP reinspection program did not incorporate a 
means for collecting and analyzing both the flood and wind damage data 
together in a systematic fashion to reevaluate the extent to which wind 
and flooding were deemed to have contributed toward damages to the 
property. Further, we explored whether the wind-related claims data 
collectively gathered by state insurance regulators would be useful to 
NFIP to reevaluate damage assessments. We determined that this 
information would be of limited value to NFIP in reevaluating wind 
versus flood damage determinations made because such data is not 
collected in enough geographic detail to match with the corresponding 
flood claims data on a property- or community-level basis. Without the 
ability to examine damages caused by both wind and flooding, the 
reinspection program is limited in its ability to confirm whether NFIP 
paid only for losses caused by flooding. 

What GAO Recommends: 

This testimony is based on an ongoing engagement and, therefore, 
includes no recommendations. GAO anticipates making recommendations in 
its final report. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-991T]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Orice M. Williams at 202-
512-8678, williamso@gao.gov. 

[End of section] 

Mr. Chairmen and Members of the Subcommittees: 

I am pleased to be here today to discuss our preliminary views on the 
National Flood Insurance Program (NFIP) and its access to the data 
needed to assess flood claims on properties damaged by both high winds 
and flooding in the aftermath of hurricanes. As we begin the 2007 
hurricane season, disputes over coverage between policyholders and 
property-casualty insurers from the 2005 hurricane season continue to 
highlight the challenges of determining the appropriateness of claims 
for multiple-peril events. While these disputes center on the extent to 
which homeowners' insurance policies covered damages that resulted from 
wind, flooding, or some degree of both, they also bring to light the 
issues NFIP faces in servicing and validating flood claims from 
disasters such as hurricanes that may involve both flood and wind 
damages. 

Key concerns raised from the 2005 hurricane season include whether or 
not some property-casualty insurance claims for wind-related damages 
were improperly shifted to NFIP at the expense of taxpayers. For 
properties subjected to both high winds and flooding, determinations 
must be made to assess the damages caused by wind, which may be covered 
through a property-casualty homeowners policy, and the damages caused 
by flooding, which may be covered by NFIP. The property-casualty 
insurer, NFIP, and the consumer all have a financial stake in the 
outcome of these determinations. Under NFIP, most flood damage claims 
are adjusted by private property-casualty insurers, known as the write- 
your-own (WYO) insurers, which sell and service flood insurance 
policies on the program's behalf.[Footnote 1] Concerns over the 
processing of these flood claims are heightened when the same insurance 
company serves as both NFIP's WYO insurer and the property-casualty 
(wind) insurer for a given property. In such cases, the same company is 
responsible for determining damages and losses to itself and to NFIP, 
creating a potential conflict of interest. 

Accordingly, questions have been raised about the information NFIP 
collects or has access to in these types of claims that would allow it 
to understand and validate the extent of damages caused by wind and 
flooding as a way to ensure that the allocation of damages and, as a 
result, the claims paid for flooding are accurate. As I indicated, 
knowing how both wind and flooding contributed to damages is 
particularly important in addressing the potential conflict of interest 
that can arise when the same company is determining the wind and flood 
damages for itself and for NFIP, respectively. My remarks today focus 
on two aspects of the NFIP claims process. First, I will discuss the 
information available to and obtained by NFIP through its claims 
process in determining flood damages for properties subjected to both 
high winds and flooding. Second, I will discuss the information 
collected by the Federal Emergency Management Agency (FEMA) as part of 
the NFIP claims reinspection process. 

My remarks today are based on our preliminary review of hurricane- 
related claims data systematically collected by NFIP for flood losses 
and by state insurance regulators for losses reported by property- 
casualty insurers for the 2005 hurricane season. Due to broad-based 
interest, the work supporting this statement is being done under the 
authority of the Comptroller General and is part of a larger effort 
being completed for the Ranking Member of the House Financial Services 
Committee. Our ongoing work addresses insurance issues related to wind 
versus flood damages and includes a review of how such determinations 
are made, who is making these determinations and how they are 
regulated, and the accuracy of claims payments based on the wind and 
flood damage determinations. 

To complete our work, we have identified and reviewed the specific data 
elements and level of geographic detail available to NFIP on hurricane 
claims payments. In addition, we reviewed a statistically valid sample 
of files of reinspections that NFIP conducted on selected properties. 
We have also discussed information and issues associated with claims 
processing activities with NFIP, state insurance regulators, the 
National Association of Insurance Commissioners (NAIC), property- 
casualty insurers, state-sponsored wind insurers, insurance agents, 
claims adjusters, and industry associations. We conducted our work in 
accordance with generally accepted government auditing standards. 

In summary: 

Limited information is collected by NFIP to understand both the wind 
and flood damage determinations made for hurricane-damaged properties, 
limiting NFIP's ability to know whether claims paid under the flood 
policy were always limited to only flood damages. For a given hurricane-
damaged property, because NFIP does not know how much of the damages 
were caused by wind and how much were caused by flooding, NFIP cannot 
determine whether the amount it paid accurately represents payment only 
for flood damage. This information is lacking even when the same 
property-casualty insurance company serves as both the NFIP WYO insurer 
and the wind insurer. For properties experiencing both wind and flood 
damages, NFIP does not consistently collect information that would 
enable it to determine, either at the time the NFIP claim was paid or 
later, whether the amount paid on a flood damage claim reflects only 
the damages caused by flooding. Claims data collected by NFIP from WYO 
insurers, including those that sell and service both the wind and the 
flood policies, do not include information on total damages to the 
property from all perils--that is, they do not report the existence of 
wind damage nor the amount of damage caused by wind when servicing a 
flood claim on the same property. FEMA states that "claims paid by a 
WYO company that do not involve flood insurance proceeds (and the data 
related thereto) are not accessible by FEMA." Hence, NFIP does not 
systematically collect data on wind damages for properties for which a 
flood claim has been received. As a result, for hurricane-damaged 
properties subjected to both high winds and flooding, NFIP may not have 
all the information it needs to ensure that its claims payments were 
limited to only flood damages. 

We found that the lack of both flood and wind damage data also limited 
the usefulness of FEMA's quality assurance reinspection program on NFIP 
flood claims when wind damage was also a factor. Specifically, the FEMA 
reinspection program did not incorporate a means for collecting and 
analyzing both the flood and wind damage data together in a systematic 
fashion to reevaluate the extent to which wind and flooding were deemed 
to have contributed toward damages to the property. We also explored 
whether the wind damage claims data that were collectively gathered by 
state insurance regulators after the 2005 hurricane season could 
provide information useful to NFIP to reevaluate damage assessments 
made and how they were apportioned between wind and flooding. We found 
that such data were not collected in sufficient geographic detail to 
match with corresponding flood claims data for a particular property, 
or even a neighborhood or city. Without the ability to examine damages 
caused by both wind and flooding, the reinspection program is limited 
in its usefulness as a tool to assess whether NFIP paid only for losses 
caused by flooding. 

Background: 

Property owners in certain coastal regions subject to hurricanes and 
flooding may have to purchase at least two, and sometimes more, 
different types of insurance policies. Flood insurance is offered by 
NFIP, while insurance for wind-related damages is generally offered by 
private insurance companies or state-sponsored insurers. NFIP was 
established in 1968 in part to provide some insurance protection for 
flood victims because the private insurers were and still are largely 
unwilling to insure for flood risks. The National Flood Insurance Act 
of 1968, as amended, allows homeowners to purchase up to $250,000 of 
NFIP coverage on their dwellings and up to an additional $100,000 for 
personal property such as furniture and electronics. Business owners 
may purchase up to $500,000 of coverage for dwellings and $500,000 on 
the contents. Exclusions under the flood policy include damages caused 
by wind or a windstorm. FEMA, which administers NFIP, is responsible 
for the management and oversight of NFIP and is assisted in performing 
these functions by a program contractor. 

While NFIP provides the flood insurance policy and holds the risk, 
private property-casualty insurers, known as WYO insurers, sell and 
service approximately 95 percent of NFIP's flood policies. WYO insurers 
retain a portion of the premium for selling flood policies and receive 
fees for performing other administrative services for NFIP, but do not 
have any exposure to claims losses. A WYO insurer may or may not also 
provide coverage for wind-related risks on the same property.[Footnote 
2] After an event occurs, policyholders normally contact a WYO insurer 
to initiate a flood damage claim. If the claimant also has a policy for 
wind damage from the same WYO insurer, the company generally adjusts 
losses pertaining to both types of damages, those caused by wind and 
those caused by flooding. In such cases, the WYO insurer must determine 
and apportion the damages caused by wind that it insures, along with 
those caused by flooding, insured by NFIP. 

To settle flood claims, insurance companies work with certified flood 
adjusters. When flood losses are reported, the WYO insurers assign 
flood adjusters to assess damages. The WYO insurers may use their own 
staff adjusters or contract with independent adjusters or adjusting 
firms to perform the flood adjustments. These adjusters are responsible 
for assessing damage, estimating losses, and submitting required 
reports, work sheets, and photographs to the insurance company, where 
the claim is reviewed and, if approved, processed for payment. 

Both the insurance industry and NFIP incurred unprecedented storm 
losses from the 2005 hurricane season. State insurance regulators 
estimated that property-casualty insurers had paid out approximately 
$22.4 billion in claims tied to Hurricane Katrina (excluding flood), as 
of December 31, 2006.[Footnote 3] However, industry observers estimate 
that insured losses tied to Hurricane Katrina alone (other than flood) 
could total more than $40 billion, depending on the outcome of 
outstanding claims and ongoing litigation. NFIP estimated that it had 
paid approximately $15.7 billion in flood insurance claims as of 
January 31, 2007, encompassing approximately 99 percent of all flood 
claims received. 

NFIP Does Not Systematically Collect and Analyze Data on Related Wind 
Damages When Collecting Flood Claims Data: 

For hurricane-damaged properties, NFIP does not know whether both wind 
and flooding contributed toward damages nor the apportionment of 
damages between them, limiting its ability to monitor the accuracy of 
flood payments and address potential conflicts of interest that may 
arise in certain damage scenarios. Based on our preliminary review, we 
found that NFIP did not systematically collect and analyze data on wind-
related damage when collecting flood claims data on properties 
subjected to both high winds and flooding, such as those damaged in the 
aftermath of Hurricanes Katrina and Rita. Further, such information is 
not sought even when the same insurance company serves as both the NFIP 
WYO insurer and the insurer for wind-related risks, posing a potential 
conflict in certain damage scenarios where properties are subjected to 
both types of perils. Without information on both wind and flood 
damages to the property, NFIP may not know on certain hurricane-damaged 
properties whether the amount it paid for a claim was limited to flood 
damage. 

As mentioned earlier, NFIP's WYO insurer may also insure the same 
property for wind-related damages. In this situation, a potential 
conflict of interest can materialize because the WYO insurer has a 
financial interest in the outcome of the claims adjustment it performs 
on behalf of NFIP. Conversely, if the policy for wind-related risks 
were issued by another insurer, the same potential conflict of interest 
would not exist because the flood and wind damages would be assessed 
and determined separately by different insurers. 

WYO insurers are required to submit flood damage claims data in 
accordance with NFIP's Transaction Record Reporting and Processing 
(TRRP) Plan, for inclusion into NFIP's claims database.[Footnote 4] In 
our review of data elements in NFIP's claims database, we found that 
NFIP does not require WYO insurers, which are responsible for adjusting 
the flood claim, to report information on property damages in a manner 
that could allow NFIP to differentiate how these damages (to the 
building or its contents) were divided between wind and flooding, even 
when the WYO insurer is also the wind insurer for the property. 

Specifically, the TRRP Plan for WYO insurers instructs them to include 
only flood-related damages in the data fields on "Total Building 
Damages" and "Total Damage to Contents." Further, the "Cause of Loss" 
data field does not incorporate an option to explicitly identify 
property damages caused by wind or partially caused by wind (e.g. 
combined wind and flood, hurricane, windstorm, etc.) As a result, WYO 
insurers do not report total property damages in a manner that 1) 
identifies the existence of wind damage or 2) discerns how damages were 
divided between wind versus flooding for properties that were subjected 
to a combination of both perils. Further, NFIP program contractors 
stated that they do not systematically track whether the WYO insurer 
processing a flood claim on a property is also the wind insurer for 
that property. This lack of transparency over both the wind and flood 
damages on hurricane-damaged properties limits NFIP's ability to verify 
that damages paid for under the flood policy were caused only by the 
covered loss of flooding. 

NFIP's normal claims processing activities, which do not incorporate a 
means to systematically collect information on wind-related damages, 
were further stressed during the 2005 hurricane season. For both 
Hurricanes Katrina and Rita, FEMA estimates that it has paid 
approximately $16.2 billion in claims, with average payments of over 
$95,000 and $47,000, respectively. As we reported in December of 2006, 
in an effort to assist policyholders, NFIP approved expedited claims 
processing methods that were unique to Hurricanes Katrina and 
Rita.[Footnote 5] Some expedited methods included the use of aerial and 
satellite photography and flood depth data in place of a site visit by 
a claims adjuster for properties where it was likely that covered 
damages exceeded policy limits. Under other expedited methods, FEMA 
also authorized claims adjustments without site visits where only 
foundations were left and square foot measurements of the dwellings 
were known.[Footnote 6] Such expedited procedures facilitated the 
prompt processing of flood claims payments to policyholders following 
the unprecedented damage of the 2005 hurricanes. However, once these 
flood claims were processed, as was the case for other flood claims on 
hurricane-damaged properties, NFIP did not systematically collect wind 
damage claims data tied to flood-damaged properties on an after-the- 
fact basis. Hence, NFIP does not know the extent to which wind 
contributed to total property damages. 

FEMA officials stated that they do not have access to wind damage 
claims data from the WYO insurers. Specifically, a letter from FEMA to 
GAO stated that: 

"FEMA's opinion is that, where flood insurance payments have been made, 
FEMA is permitted to review the background claims data in order to 
ensure that insurance claims payments are appropriately allocated to 
flood losses as opposed to wind-related losses. Such data may include 
the adjuster's report(s) and any engineering reports that support (or 
fail to support) the allocation of loss to flood versus wind damage. 
FEMA may request summaries and analyses of this information at any time 
to ensure proper processing of flood claims. Conversely, claims paid by 
a WYO company that do not involve flood insurance proceeds (and the 
data related thereto) are not accessible by FEMA, and indeed, do not 
need to be, as there would have been no improper allocation of flood 
insurance proceeds for wind losses. Moreover, the attempt to access 
this unrelated data may be found to violate various privacy 
protections." 

Hence, NFIP does not systematically collect data on wind damages for 
properties for which a flood claim has been received. As a result, for 
hurricane damaged properties subjected to both high winds and flooding, 
NFIP may not have all the information it needs to ensure that its 
claims payment was limited to only flood damage. 

FEMA's Reinspection Program Has Limited Ability to Validate the 
Accuracy of Payments on Hurricane-Damaged Properties: 

FEMA's reinspection program, which helps validate the adjustment 
process and flood payments made, provides limited information that 
could enable FEMA to better validate the claims payments it makes for 
flood damage when wind is also a factor. Based on our preliminary 
review, the reinspection program does not systematically evaluate the 
apportionment of damages between wind and flooding, even when a 
potential conflict of interest may arise with the WYO insurer. Along 
with flood claims data collected from WYO insurers that service flood 
policies, FEMA, through its program contractor, operates a reinspection 
program to monitor and oversee claims adjustments and address concerns 
about flood payments. The stated purpose of the reinspection program is 
to reevaluate the flood adjustment and claim payment made on a given 
property to determine whether or not NFIP paid the correct amount for 
flood-related damages. This is accomplished through on-site 
reinspections and reevaluations of a sample of flood claim adjustments. 
However, we found that FEMA's reinspection program did not 
systematically incorporate a means for identifying whether nor the 
extent to which wind-related damages contributed to the losses. Without 
the ability to examine damages caused by both wind and flooding, the 
reinspection program is limited in its ability to assess whether NFIP 
paid only the portion of damages it was obligated to pay under the 
flood policy. 

During our study, we reviewed hundreds of reinspection files for 
properties with flood claims tied to Hurricanes Katrina and Rita. We 
found that the reinspection files did not confirm that the claim paid 
actually reflected only the damage covered by the flood insurance 
policy versus damage caused by other, uncovered damages, such as wind. 
Rather, the reinspection files generally contained limited and 
inconsistent documentation concerning the presence or extent of wind- 
related damages on properties without additional documentation that 
would enable FEMA to evaluate both the wind and flood damage 
information together. 

Specifically, the reinspection files reviewed did not consistently 
document whether or not damages were caused by a combination of both 
wind and flooding. The reinspection activities focused on reevaluating 
the extent to which building and content damages were caused by 
flooding. While some of the reinspection files included documentation 
as to whether or not damage was caused by a combination of wind and 
flooding, most did not. Information reviewed from 740 reinspection 
files revealed that nearly two-thirds of these reinspection reports did 
not include documentation to indicate whether damages were caused by a 
combination of both wind and flooding or only flooding. We found that 
approximately 26 percent included documentation indicating damage was 
caused only by flooding, while approximately 8 percent of the 
reinspection files included documentation that damages were caused by a 
combination of wind and flooding. In cases where reinspectors indicated 
that damages were caused by a combination of wind and flooding, 
insufficient data existed to assess the extent that wind contributed to 
the damages. That is, information about the wind damage during the 
reinspection process was not documented or analyzed in a systematic 
fashion. Hence, the reinspection activities did not systematically 
document or validate the presence or extent of wind damage in 
combination with flood damage in order to verify that flood payments 
were limited to flood damage. Moreover, as we have previously reported, 
FEMA does not choose a statistically valid sample for its reinspection 
process. Therefore, the results could not be projected to the universe 
of properties for which flood claims were made.[Footnote 7] 

We also noted that on-site reinspections of properties with flood 
claims tied to Hurricanes Katrina and Rita were generally conducted 
several months after the event. Such delays, while understandable 
considering the scope and magnitude of devastation resulting from these 
hurricanes in 2005, further limited NFIP's ability to reevaluate the 
quality and accuracy of the initial damage determination, given the 
ongoing natural and manmade events that continued to alter the damage 
scene. 

Finally, we explored whether NFIP could use data collectively gathered 
by state insurance regulators on property-casualty claims resulting 
from the 2005 hurricane season to match with NFIP flood claims data. We 
found that while Florida, Mississippi, Louisiana, Alabama, and Texas 
collected some aggregate information about claims from the property- 
casualty insurers, such data would have been of limited value to NFIP 
to evaluate the accuracy of its flood claims payments in any systematic 
way. Except for Florida, which had previously collected aggregate claim 
data from property-casualty insurers for major hurricane events, the 
other states used a special data call, based on Florida's system, to 
collect this aggregate claims data from the property-casualty insurers. 
However, the information collected was not in sufficient geographic 
detail to allow a meaningful evaluation of wind versus flood damage 
assessments and apportionments made by insurers.[Footnote 8] That is, 
claims data reported by property-casualty insurers through this 
mechanism were either reported on a statewide or county/parish-level 
basis that did not allow it to be matched with corresponding flood 
claims data on a community-level (e.g. zip code) or a property-level 
basis. 

In summary, based on our preliminary review, NFIP does not collect the 
information it needs to help evaluate whether it has paid only what it 
is obligated to pay under the flood policy for properties subjected to 
both high winds and flooding, such as those damaged by hurricanes 
Katrina and Rita. For these properties, NFIP did not systematically 
collect enough information to know whether there was wind damage, much 
less enough to understand how much of the damage was determined to have 
been caused by wind and how much was caused by flooding. Without the 
ability to collect information that documents both the flood and wind 
damage, NFIP's capacity to evaluate the accuracy of its payments is 
limited. As mentioned earlier, this is particularly important in 
situations where the WYO insurer also insures the property for wind 
damages. This creates a potential conflict of interest when the same 
insurer makes both the wind and flood damage assessments, because the 
insurer is effectively apportioning losses between itself and NFIP. 
Obtaining both the flood and wind adjustment claims data, whether from 
the same WYO insurer that services both or from different insurers, 
would be necessary to NFIP to verify the accuracy of the payments made 
for flood claims. 

Information collected and assessed through FEMA's claims reinspection 
program is also of limited usefulness in confirming or validating the 
accuracy of flood payments made by NFIP on properties damaged by both 
wind and flooding. Without the additional information about wind damage 
on properties for which flood claims were also filed, NFIP may not be 
certain whether it has paid only for the flood damages to these 
properties. Finally, we determined that using hurricane claims data 
collected by state insurance regulators would not have provided data on 
a property-or community-level basis to help NFIP determine how much 
damage was caused by wind versus flooding, and how these damages were 
apportioned between the two perils. The lack of both wind and flood 
claims data limits NFIP's ability to assess whether payments made on 
flood claims from the 2005 hurricane season were accurate. 

Mr. Chairmen, this concludes my prepared statement. I would be pleased 
to respond to any questions that you or other members of the 
Subcommittees may have. 

Contacts and Acknowledgments: 

For additional information about this testimony please contact Orice M. 
Williams on (202) 512-8678 or at williamso@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this statement. Individuals making key 
contributions to this testimony include Lawrence D. Cluff, Assistant 
Director; Tania Calhoun; Emily Chalmers; Rudy Chatlos; Chir-Jen Huang; 
Barry Kirby; and Melvin Thomas. 

FOOTNOTES 

[1] NFIP contracts with private insurers to sell and administer flood 
insurance policies through the WYO arrangement, allowing the insurers 
to write flood policies backed by the federal government. 

[2] NFIP program contractors stated that they did not know how often 
the same WYO company also insured the property for wind damage because 
they did not systematically collect that information. However, a FEMA 
official we contacted stated that such a circumstance likely occurs in 
the majority of cases. 

[3] Claims paid as reported to NAIC by property-casualty insurers as of 
December 31, 2007, for multiple lines of business, including fire and 
allied lines, farm owners, homeowners, mobile homeowners, commercial 
multi-peril, commercial auto physical damage, private passenger auto 
physical damage, ocean marine, and other lines (excluding flood). 

[4] NFIP requires each WYO company to meet the requirements of the WYO 
Transaction Record Reporting and Processing Plan and to submit monthly 
financial and statistical reports as required in FEMA regulation 
44C.F.R., part 62, Appendices A and B. 

[5] GAO, National Flood Insurance Program: New Processes Aided 
Hurricane Katrina Claims Handling, but FEMA's Oversight Should Be 
Improved, GAO-07-169 (Washington, D.C.: Dec. 15, 2006). 

[6] Approximately 11 percent of all Hurricane Katrina claims were 
adjusted using expedited procedures, according to the FEMA director of 
NFIP claims. 

[7] GAO, Federal Emergency Management Agency: Improvements Needed to 
Enhance Oversight and Management of the National Flood Insurance 
Program, GAO-06-119 (Washington, D.C.: Oct.18, 2005). 

[8] In the aftermath of Hurricanes Katrina and Rita, state insurance 
regulators in Mississippi, Louisiana, Alabama, Texas, and Florida 
jointly established a data call mechanism to collect aggregate claims 
data tied to the storms reported by property-casualty insurers. These 
states collectively referred to the entire data call mechanism as the 
Insurance Disaster Reporting System (IDRS). It enabled regulators to 
better understand the total number of claims tied to the storms, the 
type of claims, the extent of losses, and the number of claims 
considered closed by property-casualty insurers. In general, the 
aggregate claims data were collected either at a state or county 
(parish) level depending on the phase of reporting. The IDRS data 
capture mechanism was originally developed by the state of Florida and 
was undergoing a redevelopment when Hurricanes Katrina and Rita hit. 
State insurance regulators, with the assistance of NAIC staff, decided 
to use this data capture mechanism because it was readily available, 
even recognizing its limitations. IDRS was not designed to monitor 
damages on a property-by-property basis.

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