NU Online News Service, April 28, 2:49 p.m.EDT

WASHINGTON–A House panel has reported out floodinsurance legislation and two other bills dealing with naturalcatastrophes, but only the flood program has unanimous industrybacking.

The House Financial Services Committee last night cleared for afloor vote an extension of the National Flood Insurance Program forfive years that has the insurance industry united behind it withfirm support.

But, the industry remains divided on legislation that wouldcreate a national catastrophe insurance pool, and unanimouslyopposed to legislation that would add wind damage coverage to theNFIP as well as more clearly define what is covered by the NFIP andhomeowners' coverage after a hurricane or similar event.

By voice vote the committee approved the Flood Insurance ReformPriorities Act of 2010 (H.R. 5114).

Besides extending the NFIP for five years, it includes limitedchanges for the program, such as increasing the maximum coveragelimits for flood insurance policies.

At the same time, the Independent Insurance Agents and Brokerswon an amendment in the bill that would add business interruptioncoverage and additional living expense reimbursement as an optionto those participating in the program.

The panel also reported to the House floor by a 39-26 vote H.R.2555, the Homeowners Defense Act of 2009. This is legislationsponsored by Rep. Ron Klein, D-Fla., that would create a programproviding a federal backstop behind insurer-funded statecatastrophe funds and federal loans if state funds are exhaustedfollowing a massive event. The industry is divided on thislegislation.

Critics derisively label the bill a "Beach House Bailout."

The Multiple Peril Insurance Act of 2009 has drawn unanimousindustry opposition. The legislation sponsored by Rep. Gene Taylor,D-Miss., would add wind damage coverage to the NFIP program. Itpassed by a 40-25 vote.

Kathy Mitchell, a federal affairs director at the NationalAssociation of Mutual Insurance Companies, noted that the panelpreviously had combined the multiperil bill with the NFIPreauthorization legislation. "The committee wisely chose to keepthe windstorm legislation separate," Ms. Mitchell said.

"By keeping the two separate, Congress can pass the reforms theNFIP needs without adding a massive new exposure that could sinkthe entire program while undermining the private market," Ms.Mitchell said.

Rep. Taylor, who sued his insurer over a personal claimresulting from Hurricane Katrina in 2005, testified at a hearingheld last week that there are "simple reasons" wind should be addedto the program.

"Homeowners and business owners in coastal communities need tobe able to buy hurricane insurance that will cover hurricane damagewithout needing to hire lawyers and engineers to engage inprolonged disputes over what portion of the damage was caused byflooding and what portion was caused by wind," he said.

"As long as wind and flood coverage are in separate policies,there will be gaps in coverage and disputes over causation afterhurricanes," he added.

In comments following the lengthy markup on the three bills,Blain Rethmeier, a spokesman for the American InsuranceAssociation, said a long-term reauthorization of the NFIP is"extremely important, especially for Americans living inflood-prone areas."

He said the recent lapses in the NFIP due to the use ofshort-term extensions has caused disruptions to homeowners,businesses and hindered real estate closings nationwide.

"We applaud the committee for moving forward on a long-term NFIPreauthorization, which will bring stability to the market," hesaid.

"Unfortunately, the same can't be said about the Homeowners'Defense Act," Mr. Rethmeier said.

"This bill does not require states to charge risk-basedpremiums, maintain adequate reserves, or establish a solid,private-market reinsurance program," he said. "Artificiallysuppressing insurance rates generates moral hazard by encouragingpeople to build and locate in more catastrophe-prone areas," headded.

But, James Lee Witt, former director of the Federal EmergencyManagement Agency and co-chair of ProtectingAmerica.org, argued,"Moving this bill is a major step toward the establishment of acomprehensive and integrated state and federal, public and privatenational program to improve the way that American families areprepared for and protected from massive natural catastrophes."

Mr. Witt said, "This bill responds to the looming threats thatour families and our nation face from hurricanes along the Gulf andAtlantic coasts as well as from replays of the devastatingearthquakes that have rocked the Midwest and the West Coast."

Regarding the vote on the NFIP long-term reauthorizationlegislation, Charles Symington, IIABA senior vice president ofgovernment affairs, said the "continued short-term extensions ofthe NFIP have caused considerable confusion in themarketplace."

He added, "We strongly support the Financial ServicesCommittee's efforts to pass a long-term extension of this importantprogram and hope that the full House and Senate will consider thislegislation promptly."

Ms. Mitchell of NAMIC noted, "Both the Beach House Bailout andH.R. 1264 would be a disaster for the federal government, andultimately the taxpayers."

She explained, "They would shift an enormous amount of risk tothe federal government that is, and should be, covered in theprivate market."

The Reinsurance Association of America also voiced strongopposition to the Homeowners' Defense Act.

In a letter sent to the committee, Franklin Nutter, RAApresident, said the bill is primarily designed to address theunderfunded state insurance facilities in Florida.

Additionally, he said, "it encourages other states to changefrom pre-funding their insured property catastrophe exposurethrough insurance premiums and assessments on insurers (such as theCalifornia Earthquake Authority) to a reliance on post-eventfunding with federal guarantees of debt issuances.

"This is certain to add billions of dollars to the federaldeficit," Mr. Nutter said.