Owners of homes and property damaged by Superstorm Sandy will be turning to the federal government to help rebuild with financial aid through the Federal Emergency Management Agency and the National Flood Insurance Program.

Already, the New York Times reports, 115,000 claims have been filed with the insurance program requiring holders of federally-backed mortgages near the coasts and flood-prone waterways to have the coverage. But the claims that could reach $7 billion exceed the program’s $3 billion borrowing power, and it is nearly $18 billion in debt accumulated to pay off victims of Hurricanes Katrina, Rita and Wilma in 2005. The higher costs beyond what premiums pay are picked up by taxpayers.

According to the Times, “federal officials have acknowledged that they will never be able to fully repay the $18 billion Treasury-financed loan that bailed the program out.”

Even so, some officials in New York and New Jersey believe the federal government should cover all of Sandy’s losses, which could mean increasing the federal deficit and further complicating Washington’s fiscal policy negotiations.

Part of the problem stems from historically low premiums that bring in about $3.5 billion a year. Rates have been kept low to encourage participation, particularly by those living in the flood-prone areas when they were created. Legislation this year addresses that shortcoming by allowing FEMA to hike premiums by 25 percent a year over the next five years.

It would also create a reserve fund to finance disastrous floods and encourages updating of flood-control maps that would take into consideration changes in rising sea levels and put some additional homes or property in flood-prone regions requiring insurance.

That is a start. Critics say the program encourages risky rebuilding in flood-prone areas with repeated claims. For example, the government has paid $1.47 million in 15 claims to one Biloxi, Miss., property valued at $183,000. The program needs to prod local governments and communities into developing stricter building codes such as requiring homes be elevated as Florida did after Hurricane Andrew in 1992.

Property owners and communities might resist federal mandates that interfere with their ocean view or tax-generating property values. But more changes are needed to shift the risk away from taxpayers.

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