As the report noted, the NFIP had a debt of $1.5 billion, pre-Katrina. But, in order to pay Katrina and Rita claims, Congress authorized FEMA to borrow enough money from the Treasury Department so that its debt was about $20.8 billion as of March 2006.

The issue divided congressional deliberation on the issue last year, with the House legislation reforming the program and authorizing additional borrowing, ignoring the debt issue, while the Senate bill called for extinguishing the debt but imposing more aggressive reforms in the program in order to hold down costs. The conflict between the two bills was so great that Congress decided to punt the issue to the coming 110th Congress, after the lack of hurricanes this season allowed FEMA to tell Congress this fall that it had enough cash on hand to pay existing claims through the early part of next year.

Specifically, the GAO report said the “NFIP paid an unprecedented dollar amount for a record number of claims from Hurricanes Katrina and Rita.”

As of May 2006, the NFIP had paid approximately 162,000 flood damage claims from Hurricane Katrina and another 9,000 claims from Hurricane Rita, the report said. Most paid claims were for primary residences where flood insurance was generally required.

FEMA and its private sector partners faced “several challenges in processing a record number of flood claims from Hurricanes Katrina and Rita,” the report said.

It noted that among these challenges was the fact that reaching insured properties in a timely way “was difficult” because of blocked roadways and flood water contamination.

Another problem was identifying badly damaged homes to be inspected in locations where street signs had washed away, GAO said.

“Despite these and other obstacles, FEMA reported that over 95 percent of Gulf Coast claims had been closed by May 2006, a time frame comparable to those for closing claims in other, smaller recent floods,” the report said.

The report did say that in order to keep pace with the volume of claims filed, FEMA approved expedited methods for claims processing “that were unique to Hurricanes Katrina and Rita.”

In response to the report, the Independent Insurance Agents and Brokers of America said it illustrated the important role the NFIP plays “in disaster preparedness and to our country's economic security.”

“As this report shows, the NFIP processed more than 95 percent of flood claims from the storms within nine months, which is a quick turnaround, considering both the magnitude of the claims and the extremely adverse conditions facing the NFIP officials, agents and adjusters in the Gulf states.”