In July 2007, Rep. Maxine Waters (DCalif.) introduced H.R. 3121,The Flood Insurance Reform and Modernization Act of 2007 in theHouse of Representatives. The bill, which would have authorizedNFIP through 2013, passed the Financial Services Committee and thefull House in just two months and was sent to the Senate forapproval. When the bill arrived in the upper chamber, significantdifferences began to surface.

Among the most controversial proposals included in the Houseversion was its provision allowing NFIP to begin offering windstormcoverage in both personal and commercial multiperil policies. Thewind provision was championed by Rep. Gene Taylor (D-Miss.), whosedistrict, which includes Gulfport, Miss., has suffered fromhurricanes in recent years.

The Senate took up the bill in May of this year, deleting thewind provision and forgiving more than $17.5 billion that NFIPborrowed in the wake of the devastating 2005 hurricane season. Andthere are other differences, too. In an attempt to phase outpremium subsidies, the Senate bill would allow premium increases ashigh as 25 percent annually, while the House bill would cap hikesat 15 percent.

Work on the bill slowly ground to a halt as the financial crisisbegan to unfold. A conference committee was never established,which is needed to work out the differences between the House andSenate before it can be sent to the White House.

As Congress revisits NFIP reform in early 2009, the NationalAssn. of Professional Insurance Agents will reiterate itspositions:

Do not expand the program to cover wind perils.Currently, the NFIP only covers flood risks, while wind insuranceis covered under homeowners' insurance and statewide wind pools.Although the wind-versus-water argument often accompanies policyclaims after a storm, allowing policyholders to purchase both floodand wind policies through the NFIP would inadvertently create moreproblems than solutions. The logistical implications of having somepolicyholders' flood and wind policies combined in the NFIP, somestill separated between the NFIP and wind pools, and still othershaving only one coverage or the other, creates tremendousunintended consequences. This uncertainty as to whether lossescaused by wind should be covered by a policyholder's propertypolicy, a state's wind pool, or the NFIP would lead to an increasein coverage disputes and related litigation, creating additionaldifficulties for homeowners suffering wind losses.

Forgive the program's debt. In February 2006,Congress increased the borrowing authority of the NFIP to $20.775billion to cover claims from Hurricanes Katrina, Rita and Wilma.This was essential to ensure that policyholders received payment ontheir flood insurance claims and PIA wholeheartedly supported thismove by Congress.

From 1986 until Hurricanes Katrina and Rita, no taxpayer moneywas used to support the NFIP. Rather, the NFIP was able to supportitself using the funds from the premiums it collected every year.All previous loans have been repaid with interest. It is importantto note that the program was created to protect policyholders andprovide loss mitigation during an average loss year. The programwas not created to handle major catastrophic losses. Separatesolutions that identify the needs of the nation's taxpayers andproperty owners must be identified for future large-scale naturalcatastrophes.

The entire future of the program is questionable if the debt isnot forgiven. Officials from FEMA and the Government AccountabilityOffice raised concerns that based on its current revenue, NFIP willstruggle paying the interest on its debt, let alone anything else.And that's only if the amount of claims are below average. It isprudent to forgive the debt of the NFIP to ensure that the NFIP canbuild reserves for future flooding events.

Increase the maximum limits for all classes of insurableproperty, including building and contents coverage. Atthis time, less real dollar coverage is provided than in the past,coverage is provided than in the past, because limits have not beenadjusted for infl ation since 1968.

Coordinate flood coverage for commercial policies in thearea of business interruption insurance. Businessinterruption insurance is now only available in the private sectorproperty market on a "covered peril" basis. Flood is not a "coveredperil." Thus, businesses affected by Hurricanes Katrina and Ritawere not covered for ongoing business needs and costs in theaftermath of these storms.

Renew the program for at least 5 years. A5-year authorization provides the certainty needed for theprogram's continuity.

While PIA recognizes the amount of work that lies ahead in thenegotiation process, we applaud Congress for extending theauthorization prior to its expiration. If the program had beenallowed to expire, agents across the country and their clientswould have been placed in a difficult situation. An expired NFIPwouldn't be a first for Congress. It last expired Dec. 31, 2002,but was quickly reauthorized when Congress reconvened in January2003. While it was only technically expired for a few days, itcaused a lot of frustration and confusion.

The recent financial crisis may lead to greater attention tolender insurance requirements. This potentially could include NFIPrequirements beyond mandatory zones. This means that insuranceagents will have to engage the NFIP more frequently as lenderrequirements increase.