Nationwide Insurance last week called for a federally reinsured homeowners insurance policy that would offer both flood and wind insurance.

The concept of a federally supported flood and wind policy is contained in a measure to reform the National Flood Insurance Program that was recently passed by the U.S. House of Representatives, but a rival Senate bill contains no such provision.

A conference committee session to work out the differences in the two bills has yet to be scheduled. The NFIP program will expire unless it is reauthorized by Sept. 30.

Columbus, Ohio-based Nationwide said in a statement that a combined flood and wind policy offering “would avoid disputes over 'wind/water' issues for policyholders across the country.”

In the wake of Hurricane Katrina in 2005, there has been an explosion of lawsuits over the question of whether tidal surges blown in by a storm qualify as wind damage, and whether any portion of a wind policy should pay any part of a claim for a home that has flood damage as well as wind destruction, the carrier noted.

Nationwide said its proposed “Enhanced Homeowners Insurance Policy” would be authorized and regulated by the federal government, combining the wind insurance coverage of a traditional homeowners policy with flood insurance coverage similar to that now offered by the National Flood Insurance Program, into one home insurance policy.

Under the proposed coverage, the private insurance market would bear the primary responsibility of paying claims, with the federal government acting as a reinsurer and regulator, according to Nationwide.

“Americans need not suffer through a catastrophic event lacking the comprehensive insurance coverage they need,” said Nationwide's chief executive officer, Jerry Jurgensen.

“If Hurricane Katrina taught us anything, it is that the market needs a home insurance product that covers flooding as well as wind damage in one policy,” he said in a statement.

Nationwide said if authorized by Congress, the proposed enhanced policy would assure those who purchased it that no matter how their home may be damaged, coverage for wind and water would be available in one policy.

In the aftermath of Katrina, Nationwide noted, thousands of lawsuits were filed against insurance companies, challenging long-held homeowners policy provisions that exclude flood damage as a covered loss.

The company said that even though the courts have upheld the flood exclusion provisions as legal, Nationwide engaged in conversations with a variety of stakeholders to find a market-driven solution to the “flood/wind” problem and to propose a product that would meet customer needs.

“This solution will need the support of the federal government to be implemented,” Mr. Jurgensen said. “For the benefit of all, Congress should begin the process to make this new coverage option available as quickly as possible.”

The enhanced homeowner insurance policy would fold flood coverage into a new, augmented homeowners policy that insurers can voluntarily sell, and homeowners can voluntarily purchase. Neither coverage would be mandatory, Nationwide said.

Regulation for the enhanced policy would be under the U.S. Treasury Department, which would also reinsure the flood portion to make sure that coverage was financially feasible. The enhanced policy would be an option that would increase both customer choice and customer confidence, according to Nationwide.

The new, enhanced policy would be an additional option for customers to consider as they make key decisions to protect their home, the carrier said.

Nationwide added that existing coverage options would also be available. “Consumers would still be able to purchase a policy that does not cover flood damage, or a stand-alone policy from the federal flood program. However, for homeowners who desire comprehensive coverage in one policy, this policy would provide it for them,” the carrier noted.

Nationwide said it continues to support an open dialogue with policymakers to develop market-driven solutions that will “give customers, carriers and regulators greater peace of mind when the next storm strikes.”

Special Reports /

Nationwide Urges Federally Reinsured Homeowners Policy For Both Wind, Water

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