WASHINGTON–The Senate Banking Committee approved legislationreforming the National Flood Insurance Program today, and insuranceindustry trade groups expressed immediate support for themeasure.

But the bill is far different from a flood program measureawaiting House floor action that was reported out by the HouseFinancial Services Committee in March.

The Senate bill calls for policyholders to pay higher rates andfor the program's $23 billion debt to be forgiven.

This provision will be a key hurdle in the House, becauseconservatives there may find it difficult to digest, setting up apotentially testy conference with the Senate later this year.

The Senate bill also creates a mandatory reserve fund “toprovide additional funding to help pay future claims withoutfurther need to seek contribution from the U.S. taxpayer,” saidSen. Richard Shelby, R-Ala., chairman of the committee. The billpassed the panel, 20-0.

The bill is being supported by the insurance industry,supporters said, because it would not reduce company or agentcommissions. It calls for greater increases in premiums and moreprogram tightening than the House bill, and will thereforetheoretically increase industry revenues from the program.

During a March hearing, members of the Senate Banking Committeehad called into question industry commissions and implied theSenate bill might seek to cut them to reduce the program's debt.But the bipartisan bill it approved today only called for aGovernment Accountability Office study of the commissionsissue.

According to NFIP officials, industry commissions range from 30to 32 basis points, and are determined annually. Of that, agentsget 15 basis points, and 2-3 basis points are used to pay statepremium taxes. Companies get the rest.

In introducing the bill today, Sen. Shelby, after touting themeasure's benefits, warned that the “next fifteen months will alsobe critical to determine if the Federal Emergency Management Agencyis up to the task of administering this program, or if this programshould be reorganized into another federal agency.”

Melissa Shelk, American Insurance Association vice president forfederal affairs, said AIA is “pleased that the legislation containsprovisions to ensure the NFIP receives the necessary borrowingauthority to pay the remaining flood claims from last year'shurricanes.”

David Winston, senior vice president of federal affairs for theNational Association of Mutual Insurance Companies, said Sen.Shelby's legislation “establishes the framework for a federal floodinsurance program that will be able to continue to servepolicyholders in need of flood insurance while protecting Americantaxpayers.”

Charles E. Symington Jr., Insurance Agents & Brokers ofAmerica senior vice president for government affairs and federalrelations, said the re-drafted bill's reforms are key to thelong-term stability of the flood insurance program,” and it “iseven more crucial now that hurricane season is upon us.”

Ernst Csiszar, president and CEO of the Property CasualtyInsurers Association of America, called NFIP essential to “ournation's financial infrastructure,” and said the flood programworks for consumers and communities.

The bill, known as the “Flood Insurance Reform and ModernizationAct of 2006,” will require more modern flood maps and increasepenalties for lenders who violate its requirements.