Legislation aimed at reforming the National Flood InsuranceProgram and strengthening its financial position was approvedunanimously by the Senate Banking Committee last Wednesday.

Committee Chairman Chris Dodd, D-Conn., said the bill “helps toensure that the flood insurance program can continue to providecritical insurance coverage so that people are not crippled whenfacing damage to their homes and businesses.”

Under the measure, the program's $20 billion debt would beforgiven.

The legislation had two amendments added to it prior to themarkup. One, by Sen. Robert Casey, D-Penn., would establish aNational Flood Insurance Advocate to handle consumer complaints,and another, by Sen. Robert Menendez, D-N.J., would extend a pilotprogram enabling the NFIP to better deal with severe repetitiveloss structures that have incurred flood damage on more than oneoccasion.

Sen. Dodd noted that the pilot program had initially beenapproved by legislation in 2004, but the Federal EmergencyManagement Agency had yet to implement it. The amendment, he said,would ensure the program was given a full five years for itseffectiveness to be measured.

Sen. Mel Martinez, R-Fla., raised the issue of adding windstormcoverage to the program, which was the focus of an amendment thathe had planned to offer with Sen. Charles Schumer, D-N.Y. However,the amendment was withdrawn prior to the markup. Adding windcoverage, he said, “would have been a great improvement to theprogram.”

Sen. Dodd responded that there was “merit in that suggestion”but cautioned that he felt the Senate could not act on such aproposal without an understanding of how it could affect the issue.“The problem is we don't know what the implications” of that are,he said, adding that he “would be uneasy” moving on an issuewithout knowing what its ultimate effects would be.

Sen. Tom Carper, D-Del., suggested that adding wind coverage toa program already needing to be relieved of its $20 billion debtmight be asking too much.

“That may be a bridge too far,” he said.

Insurance industry groups have supported the Senate version ofthe bill in a large part because it does not include the windcoverage position.

“We are especially pleased the committee chose not to overburdenthe program,” said Justin Roth, senior federal affairs director forthe National Association of Mutual Insurance Companies. “Includingwind in the NFIP would be bad public policy and put taxpayers onthe hook for a risk the private marketplace is able to write.”

American Insurance Association President Marc Racicot noted thatCongress would be better served to help the private sector managewindstorm risk than to place it on the backs of the taxpayers, andoffered a prediction of what the implications that concerned Sen.Dodd would be.

“Adding wind coverage would result in a dramatic expansion ofthe NFIP–with the potential for huge deficits–and a fundamentalrealignment of both the NFIP and the private wind insurancemarket,” he said. “It would also encourage building inhurricane-prone regions, putting more people and property in thepath of devastating storms.”

Noting that his group “has always supported reforming the floodprogram so that it can be solvent for the foreseeable future andhelpful to consumers in need,” David Sampson, the new president andchief executive officer of the Property Casualty InsurersAssociation of America, said the inclusion of wind coverage “wouldbe extremely costly and potentially very damaging” to the programand policyholders.

“We fully support the proposal to move forward with neededreforms without including needless additional exposure to a programthat is already overburdened in the wake of Hurricanes Katrina andRita,” he said.

The wind coverage provision, originally authored by Rep. GeneTaylor, D-Miss., is included in the House version of thelegislation, meaning the issue will have to be worked out inHouse-Senate conference.

One agents group, the Independent Insurance Agents & Brokersof America, expressed some dismay about the lack of coverageexpansion in the Senate bill, although not in reference to thewindstorm provision. The IIABA had pressed for an increase inmaximum coverage limits and the inclusion of optional coveragessuch as business interruption coverage and additional livingexpenses.

“Both an increase in the maximum coverage limits and aninclusion of optional coverages would better allow both individualsand commercial businesses to insure against the damages thatmassive flooding can cause,” says John Prible, assistant vicepresident for federal government affairs for the IIABA. “We hopethe Senate will consider including these provisions as thelegislation moves forward.”

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