NU Online News Service, June 9, 2:44 p.m.EST

WASHINGTON — A key member of the Senate BankingCommittee says "every aspect" of the National Flood InsuranceProgram should be revised.

The comments by Sen. Richard Shelby, R-Ala., ranking minoritymember of the panel, raised fears within the industry that Congressmay not be able to complete work on a long-term reauthorization ofthe program before the current authorization expires Sept. 30.

"Every aspect of the program must undergo significant revisionfor it to survive and continue on a sustainable path," says Shelbyduring a June 9 hearing on the NFIP.

He particularly cites the NFIP's nearly $18 billion in debt andnoted the program's problems in servicing that debt. 

At the same time, an administration official testifies thatduring a period when the federal budget is under intense scrutiny,the Obama administration also sees a need to reduce the scope ofthe program.

Craig Fugate, FEMA administrator, says concerns remain about theprogram after 42 years of program operation.

Sen. Tim Johnson, D-S.D., committee chairman, was moreoptimistic. He says that before the current authorization runs outSept. 30, "I hope that we can once again come together and pass abipartisan bill that will build a sustainable future for theprogram and American citizens."

After more than a decade of seeking input, identifying issues,and undergoing studies, "FEMA believes that the time has come toundertake a critical review of the NFIP," Fugate says.

"As members of this committee and others in Congress considerNFIP reform, the Department of Homeland Security and theadministration is prepared to assist those efforts as appropriate,"he adds.

Shelby cites the Write Your Own insurance companies, noting thatthe Government Accountability Office recommends that the Write YourOwn program have more transparency and accountability.

"This is something we should pursue," he says.

Moreover, Shelby says the committee "should examine the types ofproperties the flood insurance program is covering to ensure thatits resources are spent effectively." 

The hearing was held against the background of pending Housefloor action on legislation reauthorizing the program through Sept.30, 2016 that was reported out May 13 by the House FinancialServices Committee.

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

A key component of the bill is a provision that, for the firstsince the program was launched in the 1950s, opens the door for theprivate market to play a strong role in insuring against flood,primarily through reinsurance.

The only action on flood insurance in the Senate so far wasintroduction May 26 of legislation that would, amongst otherprovisions, seek to deal with the sensitive wind-versus-waterissue.

The bill is the Consumer Option for an Alternative System toAllocate Losses Act of 2011, or COASTAL Act, S. 1091.

The bill was introduced by Sen. Roger Wicker, R-Miss. It would create a "standardized lossallocation" system to distribute losses between the National FloodInsurance Program and private or residual-market-provided windinsurance following the total loss of any property that carriesboth flood and wind insurance.

Inclusion of such provision as anti-concurrent causationexceptions in standard personal lines insurance contracts inMississippi generated huge controversy when insurers refused tohonor claims resulting from Hurricanes Katrina and Rita in2005—hence the interest of a Mississippi senator in this issue.