WASHINGTON--A bill to reform the National Flood Insurance Program that includes no cuts in company or agent commissions will be considered by the Senate Banking Committee Thursday.

Insurance industry trade groups, it was learned, have drafted a joint letter to Sen. Richard Shelby, R-Ala., the committee chairman, telling him they support the measure.

The Senate legislation is different from the companion House bill because it will require more policyholders to pay fair-market rates and more homeowners to participate in the program than called for in the House bill.

The bill will also require more modern flood maps and stiffer penalties for lenders who violate its requirements.

Known as the "Flood Insurance Reform and Modernization Act of 2006," the bill calls for stricter compliance with mandatory insurance coverage and increased participation in the program.

Support from membership in both parties as well as industry backing are expected to push the bill through the Banking Committee. Sen. Shelby has backed off from earlier statements that he would seek to reduce company and agency commissions as part of his plan to reduce government subsidies to the program.

Instead, the bill as written by the committee staff calls for a Government Accountability Office study of the commission issue.

Some industry sources say the measure may run into opposition on the Senate floor from members in coastal states, such as Florida and North Carolina, because the cost to homeowners in those areas will be higher than for homeowners in less exposed jurisdictions.

Congress is dealing with the issue under pressure from conservatives concerned about the subsidies inherent in the program--subsidies which because of Hurricanes Katrina and Rita as well as other catastrophic hurricanes have left the program $23 billion in debt.

The Shelby bill mirrors the House bill in that it will require policyholders with vacation homes to pay fair market rates for their premiums. The House bill was reported out March 16 by the House Financial Services Committee and is awaiting floor action, something not expected until mid-June at the earliest.

Senate bill language toughens the House measure by ending subsidies for structures that have suffered severe repetitive losses due to flood claims, property that has incurred damage that exceeds its current fair market value, and any property that has sustained substantial damage exceeding 50 percent of its fair market value or improvements exceeding 30 percent of its fair market value.

In their letter, which was viewed as it was awaiting transmittal to Sen. Shelby today, the trade groups voiced their "strong support" for the Shelby bill. "The devastation from Hurricanes Katrina, Rita and Wilma exposed weaknesses in the NFIP and the need for reforms to put it on a more stable financial footing," the letter said. "We greatly appreciate your leadership in crafting legislation to accomplish this goal."

In particular, the letter said, the bill "stabilizes the framework for a federal flood insurance program that will be able to continue to serve policyholders in need of flood insurance while protecting American taxpayers."

The letter was signed by the American Insurance Association, the Independent Insurance Agents and Brokers of America, the National Association of Mutual Insurance Companies, the Property and Casualty Insurance Association of America, and the Professional Insurance Agents of America.

Special Reports /

Insurers To Shelby: We Like Your Flood Bill Now

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