WASHINGTON–The House Financial Services Committee voted 38-29 to approve legislation yesterday that would expand the National Flood Insurance Program to offer wind damage coverage.

This fall, the legislation, HR 3121, will move to the House floor for action. It combines previously introduced flood reforms designed to increase the number of consumers in the program and reduce subsidies for some properties with a bill to add the wind coverage option.

The measure requiring windstorm insurance to be provided by the flood program was introduced earlier this year by Rep. Gene Taylor, D-Miss.

In voting yesterday, committee members split largely along party lines. Republican opposition to the bill mainly concerned inclusion of the wind coverage provision, which they argued would increase taxpayer liability for a program already deeply in debt.

Democrats countered by noting a provision in the bill requiring premiums for wind coverage to be actuarially sound. “The answer to 'how much is the bill going to cost?' is 'nothing,'” said Rep. Barney Frank, D-Mass., the chairman of the committee.

Republicans responded that it is unlikely the actuarial soundness called for will survive political pressure to lower premiums.

“We all know our constituents will be calling us from day one begging for lower rates and higher coverage,” said Rep. Tom Feeny, R-Fla.

Later in the hearing, Rep. Feeny said the committee would be “usurping” the private market if the wind coverage provision were passed, and pointed to the experience of the Florida market since the state established its own Joint Underwriting Authority as insurer of last resort.

That entity, now known as Citizens Property Insurance Corp., is currently the largest insurer for wind coverage in the state, he said.

Inevitably, Rep. Feeny argued, the question of offering lower rates arises, and “no legislator in his right mind would vote against subsidizing,” he said. “It's happened in Florida, and we're going to do it again if we adopt this bill.”

Rep. Frank, however, said that opponents would not have to look far to see a difference in this particular legislation.

“I would give one piece of evidence that Congress can say 'no,'” he said, “and that's the rest of this bill.”

Other provisions in the bill would require the Federal Emergency Management Agency to revise the nation's flood maps by 2010 and phase out subsidies for structures built before the NFIP was established that are not primary residences.

Insurance groups voiced opposition to the wind coverage provision, echoing many of the same concerns voiced by members of the panel.

“Adding wind coverage to the National Flood Insurance Program would create artificial subsidies, which would essentially raise rates for consumers in noncoastal areas…” said Cliston Brown, federal affairs director for the Property and Casualty Insurers Association of America (PCI).

Mr. Brown noted that “the NFIP is already $17.5 billion in debt, so adding further exposure to the program is not a good idea. Furthermore, state residual market mechanisms provide wind coverage where there is no market, and private insurers provide wind coverage where there is a market.”

American Insurance Association President Marc Racicot said of the passage by the committee that “we continue to believe this is not the right solution,” noting a Towers-Perrin study commissioned by the group that the impact on taxpayers could be as high as $200 billion. That study, according to Rep. Taylor, is based on false assumptions.

Mr. Racicot said AIA had hoped the committee would have chosen to pursue a proposed six-month study by the Government Accountability Office, “which would have provided in-depth analysis of adding wind coverage to the NFIP and provided a better understanding of the real cost of adding wind coverage.”

Rep. Frank said during the markup that the bill will not go to the House floor before lawmakers leave for their August recess, and may not be acted on until October.

Special Reports /

House Unit Okays Flood Program Expansion

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