WASHINGTON–The House approved legislation designed to reform theinsolvent National Flood Insurance Program yesterday after extendeddebate.

Approval for the bill came on a 416-4 vote.

The final product contains amendments of deep concern to theinsurance industry, including one that mandates that the governmentinvestigate insurance company determinations of whether homes havea covered wind damage claim or an uncovered flood loss.

The American Insurance Association said after the vote thatwhile it supported the underlying bill, it hopes certain amendmentswill be revisited before the bill is enacted. A major concern is aprovision calling for an “investigation,” rather than a study, ofthe wind-vs.-flood issue.

Dennis Kelly, an AIA spokesman, also noted AIA concern about anamendment by Rep. Jo Ann Davis, R-Va., which would extend theproof-of-loss deadline. Another amendment contained a retroactiveclause dealing with claims dating from 2003.

Mr. Kelly noted that the Senate has yet to put its bill on thefloor, “and we expect there will be a conference to work out thedifferences between the House and Senate bills.”

A key difference between the House and Senate bills is that theHouse bill as passed Tuesday increases the NFIP borrowing authorityto $25 billion.

The Senate bill forgives approximately $20 billion of the NFIP'sdebt, but imposes tougher standards for coverage going forward thandoes the House bill. The Senate bill was passed in May and isawaiting floor action.

The Independent Insurance Agents and Brokers of America praisedthe House bill, especially the provision increasing the program'sborrowing authority.

The Property Casualty Insurers Association of America said it“hailed” passage of the House bill, noting that it contains manyreform provisions proposed by the trade group and its members.

The House bill requires the owners of vacation homes to paymarket rates for flood insurance coverage from the NFIP, endssubsidies for repetitive loss properties, and will update floodmaps and require homeowners within the 100-year flood plain to haveflood insurance.

The most controversial amendment for insurers was proposed byRep. Gene Taylor, D-Miss. It charges the Government AccountabilityOffice with “investigating” the wind/water issue in the wake ofHurricanes Katrina and Rita.

Rep. Taylor said that protecting citizens from floods issomething the private market “wouldn't do or chooses not to do.”The report is due six months from enactment of the legislation.

In the wake of 2005's storm season, he said, the NFIP itself hasdrawn little criticism. “I've had very few complaints about thefederal flood insurance program,” he said. “But, I've had tens ofthousands of complaints from people about their wind coverage.”

Rep. Taylor's amendment received strong vocal support fromDemocrats, including Rep. Barney Frank.

And Rep. Mike Oxley, R-Ohio, chairman of the House FinancialServices Committee and manager of the bill, added that Republicansthink it is “appropriate” that the IG investigate thecontroversy.

Rep. Davis said her second amendment will extend the deadlinefor filing for proof of loss for up to 180 days following adisaster. It will also prohibit NFIP from denying claims solely forfailing to meet the deadline and make this change retroactive toSeptember 18, 2003, in order to provide much-needed relief forHurricane Isabel victims.

In many cases, claimants were reportedly pressured to signadjusters' proof of loss within 60 days of the flood even thoughthey believed the adjusters had underestimated both the scope ofdamage and the associated costs of repair of their properties, shesaid.

For Republicans, the bill needed to be passed to make up for thegovernment's obligations to Katrina victims.

“We have an obligation to these estimated 225,000 policyholderswho have already filed a claim relating to the events of 2005,”Rep. Oxley said. “At the same time, we also have an obligation toreform and modernize the NFIP so that homeowners will have accessto sensible flood insurance,” Rep. Oxley said.

A phase-out of subsidies for flood insurance for properties usedas secondary homes or vacation homes also drew controversy. “If youcan afford one of those homes, you can afford to pay your freight,”Rep. Oxley said.

This notion drew a challenge from fiscally conservativeRepublicans, who sought an immediate end to the subsidies ratherthan a gradual phase out.

“We have a duty to find savings wherever possible,” said Rep.Steve Pearce, R-N.M., who proposed the amendment.

Rep. Frank cautioned that an immediate end to the subsidiescould cause a severe shock to some areas that are reliant onvacation homes and tourist income, as well as small businesses inthose areas that would also be affected by the Pearceamendment.