The House Financial Services Committee voted last week toapprove legislation that would increase the borrowing authority forthe National Flood Insurance Program, as well as implement severalreforms.

The committee passed the bill by a voice vote of 44-to-10 afterrejecting a proposed amendment by Rep. Jeb Hensearling, R-Texas,which would have immediately ended the subsidized rates paid forflood coverage by homeowners whose property predates the FloodInsurance Rate Maps. The current bill only eliminates the subsidiesfor nonprimary residences and vacation homes over time.

In debating the amendment, Rep. Richard Baker, R-La., said thatgradually eliminating the subsidies in the future “might besomething I could understand as defensible,” but he was unable tosupport anything that would put a greater, more immediate burden onhomeowners hit by Hurricane Katrina. “The underlying bill isalready a big jump for me,” he said.

Under the bill, the Federal Emergency Management Agency'sborrowing authority for the NFIP would be increased to $25 billionto cover losses in the wake of Hurricanes Katrina and Rita.

The increased borrowing authority had been deemed a necessityfor the NFIP, as well as insurers involved in the “Write Your Own”coverage aspects of the program.

“This new increase is needed immediately as the NFIP will soonrun out of money–again–to pay its claims that are owed to thosehomeowners who have paid for flood insurance,” said David Winston,senior vice president of federal affairs for the NationalAssociation of Mutual Insurance Companies.

“Without an increase in borrowing authority, the NFIP would haveto instruct Write-Your-Own companies to stop paying claims, as itdid late last year,” he added.

Rep. Hensearling, a fiscal conservative, had also proposed anamendment that would have only raised the borrowing authority to$20.775 billion–less than the $23 billion FEMA has said it willneed to cover its Katrina and Wilma-related losses. After the voteon his other amendment, he withdrew his request for a recorded voteon the reduced borrowing authority, and it was rejected by a voicevote.

Additionally, the legislation makes significant changes to theNFIP designed to increase the amount of money taken in by theprogram and the number of homeowners who purchase floodcoverage.

o Coverage limits would be increased to $325,000 for a home,$670,000 for a nonresidential building and up to $135,000 for thecontents of a structure.

o Homeowners and businesses would be able to buy extra coveragefor losses to basement improvements in a home or for businessinterruption.

“We had a number of members in the Gulf region working out oftheir homes or storefronts because their offices had beendestroyed,” said Charles Symington, senior vice president ofgovernment affairs and federal relations for the IndependentInsurance Agents and Brokers of America. “Business interruptioncoverage is crucial to small businesses and to our members.”

In addition, the bill gives the NFIP an increased ability toraise rates–by as much as 15 percent annually, as opposed to thecurrent cap of 10 percent.

Another amendment, proposed by Rep. Debbie Wasserman Schultz,D-Fla., and agreed to by a voice vote, would require the NFIP toparticipate in a state's nonbinding mediation program if requestedto do so by the state's insurance commissioner.