WASHINGTON–The Bush administration flatly opposes expanding theNational Flood Insurance Program to include windstorm coverage, aTreasury official told a House subcommittee today, placing a majorroadblock in the path of legislation to expand the program.

Assistant Secretary for Economic Policy Phillip Swagel said intestimony before the House Financial Services Subcommittee onHousing and Community Opportunity that “the administration opposesH.R. 920.”

The hearing was held to gain the views of congressmen, stateinsurance commissioners, industry groups and consumers concerningthe Multiple Peril Insurance Act of 2007.

The bill was introduced earlier this year by Rep. Gene Taylor,D-Miss., a vocal critic of the insurance industry for its actionsin the wake of the 2005 Hurricane season.

Those who find fault with the program have suggested thatprivate insurers who administer the flood program for thegovernment have frequently managed to attribute home damage toflooding rather than windstorm activity, which they insure for.

Treasury's views were supported by Ted Majewski, senior vicepresident of Pennsylvania-based Harleysville Insurance Group,representing three major trade groups, but rejected by arepresentative of the National Association of InsuranceCommissioners.

Kansas Insurance Commissioner Sandy Praeger, who is alsopresident-elect of the NAIC, testified that private insuranceappears to be paying less and less of the losses created by majorstorms.

At the same time, Robert P. Hartwig, president and chiefeconomist for the Insurance Information Institute, offered similararguments to those of the administration and the insurers.

But he also pointed out that H.R. 920 will not necessarily solveany of the problems facing the market today.

The take-up rate for flood coverage has historically been“woefully low” and is unlikely to rise as a result of the bill, heargued.

In his testimony, Mr. Swagel said that a federal insuranceprogram for wind damage will displace the active private market and“could give rise to a large new burden on federal taxpayers.”

“The administration supports leaving wind coverage to thewell-developed private market for such insurance and not creating afederal program for wind losses.”

In his testimony, Mr. Majewski told the panel that risk-basedpricing would be swept away in the tide of inclusion in theNFIP.

He spoke for the majority of the industry, the AmericanInsurance Association, the Property Casualty Insurers Associationof America and National Association of Mutual InsuranceCompanies.

Mr. Majewski said policyholders most likely to purchase theexpanded coverage would be those in the high-risk areas, which hesaid would create an “adverse selection” and limit the program'sability to spread its wind risk.

He also pointed out that the NFIP is already facing considerabledeficits as a result of the 2005 storm season, while the privatemarket has paid out significantly more in claims.

Ms. Praeger contended, however, that there is a “growingdiscrepancy” between total losses and insured losses after a majorcatastrophe.

“This discrepancy is exacerbated by a lack of all-perilscoverage,” she said. As an example, Ms. Praeger said that while theprivate market did indeed pay out $40 billion in the wake ofHurricane Katrina, “private insurance covered only one third of thetotal economic response, with taxpayers covering the remainingseventy percent.”

“Providing consumers with all-perils coverage would unify thesedisparate approaches under one policy, shifting the burden off theconsumer,” she added.