NU Online News Service, May 13, 12:43 p.m.EDT

The House Financial Services Committee reported to the Housefloor legislation reauthorizing the National Flood InsuranceProgram for five years. The vote was unanimous.

The bill is H.R. 1309, the Flood Insurance Reform Act of2011.

A key component of the bill is a provision that, for the firsttime since the program was launched in the 1950s, opens the doorfor the private market to play a strong role in insuring againstflood, primarily through reinsurance.

The House leadership is hoping that, because the bill has strongbipartisan support, it could be passed by the full House beforeCongress leaves for its Memorial Day recess May 27.

Industry and House leadership want the bill out the doorpromptly in order to give the Senate as much time as possible todeal with the issue before the current extension of the programruns out Sept. 30.

The program has been extended 10 times on a short-term basissince the original reauthorization ran out Sept. 30, 2008. Theprogram lapsed for a total of 53 days last year because Congresswas unable to pass short-term extensions on time.

Following a lengthy debate Thursday, the full committee decidedto add business interruption insurance to the program. Asubcommittee had passed a provision adding the coverage earlier,and the full committee rejected an amendment sponsored by Rep. JebHensarling, R-Texas, that would have removed that provision.

The vote on the amendment was 9-38.

Among the technical or special interest amendments voted on thepanel, the committee rejected a proposed provision that would havemandated that 829,000 NFIP customers serviced by State Farm agentsbe pushed back into the private sector within 27 months.

Currently, these NFIP customers are underwritten directlythrough NFIP-direct, the result of a decision last June by StateFarm to exit the program because of the many lapses in the programthrough congressional inaction since 2002.

State Farm is gradually transferring control of the policies itunderwrote to NFIP-direct through a process that will be completedSept. 30.

But when the transition is completed, State Farm agents willstill service the policies, according to Phil Supple, a State Farmspokesman.

The amendment that would have taken those policies away from theState Farm agents was rewritten, and now it simply calls for astudy of the issue, with the Federal Emergency Management Agency,which administers the program, reporting back to Congress a year ofenactment of the legislation.

The bill also mandates that FEMA send out a letter every year toall NFIP-direct customers saying NFIP-direct customers have theoption of getting their NFIP policies through other agents.

Regarding privatization efforts, FEMA is explicitly authorizedunder the measure to "carry out initiatives to determine thecapacity of private insurers, reinsurers, and financial markets toassume a portion the flood risk exposure in the United States."

The bill "clarifies" the power of the FEMA administrator toutilize private market reinsurance capacity to minimize thelikelihood that the program would need to borrow additional fundsfrom the Treasury.

The legislation also directs FEMA to assess the capacity of theprivate reinsurance market by seeking proposals to assume a portionof the program's risk, and to submit a report on such assessmentwithin six months of enactment.

The bill also gives FEMA the power to tear down and rebuildflood-damaged properties with the caveat that such action "must becost-effective."

The bill was first passed April 11 by the House Subcommittee onInsurance, Housing and Community Opportunity.

Credit Union Times reports that the committee alsoapproved an amendment supported by lenders that would clarifyexisting law allowing lenders to collect premiums for force-placedflood insurance during the 45-day notification period in theinstance when a borrower allows his or her policy to lapse. Theamendment passed on a voice vote.