Obama Mobilizes FEMA As Sandy Damages Soar Into Billions

With President Obama moving to hasten the federal government's response to Hurricane Sandy, assessment firms are predicting the storm's cost will reach into the double-digit billions.

Obama swiftly moved to facilitate the flow of aid to states that were heavily battered by the storm, in part by declaring New Jersey, New York and Connecticut “major disaster areas.” In a conference call with reporters, Federal Emergency Management Agency Director Craig Fugate called the president's decision to so designate New York and New Jersey while the storm was still ongoing “extraordinary.”

“Generally we do more thorough assessments and it often times will take longer," Fugate said.

President Obama's declaration means that homeowners and business owners in those states can apply directly for aid. He has also issued "emergency declarations" for several other states that allow FEMA to help oversee relief efforts and make those states eligible with a minimum of $5 million in federal support.

A FEMA spokesperson said the agency was focused on responding to the storm and had not yet studied how much the cleanup would cost. But firms that calculate disaster costs for the insurance industry were projecting a hefty price tag.

AIR Worldwide said that insured losses could total between $7 billion and $15 billion, while Eqecat said that insured losses would mount to between $5 billion and $10 billion.

FEMA has up to $11.3 billion to spend on disaster relief in 2012, thanks to the Budget Control Act's mechanism for allocating disaster response funding. FEMA has about $7 billion it can begin spending, with the rest available if Congress authorizes it.

As the relief process unfolds, the magnitude of Sandy's destruction all but ensures complex and litigious efforts to work out insurance claims. Home insurance companies cover wind damage, while FEMA handles flood damage claims through its National Flood Insurance Programs.

Determining whether damages came from water or from wind is a complex process, one that relies in part on piecing together a chronology of which hit first. Claims related to damages from Hurricane Katrina took years to settle.

In a Tuesday press release, FEMA said that it had deployed more than 1,900 workers to handle the response to Sandy. Their responsibilities include conducting search and rescue operations, helping to remove debris and working to restore power. As of Tuesday morning, the agency had distributed more than 645,000 liters of water, 560,000 meals and thousands more blankets and cots to two naval bases in New Jersey and Massachusetts.