Insurers: Flood Program Funding Bill Has Irksome Items

WASHINGTON--Legislation introduced yesterday in the House to reform the National Flood Insurance Program drew mixed reviews from insurance industry trade groups.

While praising the funding portion of the bill, the Property Casualty Insurers Association of America (PCI) said the measure could add significant paperwork and claims and litigation expenses "to the already struggling program, creating additional costs for taxpayers."

The legislation is similar to that passed by the House last year which failed to win support in the Senate, which adjourned before acting on it or a different bill reported out by the Senate Banking Committee.

PCI said the positive aspects of the legislation, H.R. 1682, the Flood Insurance Reform and Modernization Act of 2007, includes an increase of $725 million, to $21.5 billion, of the NFIP's borrowing authority.

The legislation also increases funding for mitigation programs and mapping updates, and supports greater outreach to homeowners to encourage the purchase of flood insurance policies.

Justin Roth, senior director of federal affairs for the National Association of Mutual Insurance Companies, sees the bill as a positive.

Regarding the decision to move second homes to actuarially-based rates, Mr. Roth said: "It is unconscionable that American taxpayers currently subsidize flood insurance premiums for people who can afford to purchase vacation homes in disaster-prone areas. We believe that eliminating this subsidy is an important provision in this legislation."

Mr. Roth also said that NAMIC is pleased the measure "includes a provision that increases the NFIP's borrowing authority to allow it to pay all flood claims arising from the 2005 storms."

Mr. Roth explained, "We believe Congress must act responsibly to insure that those homeowners who did the right thing and purchased flood insurance are compensated so that they can pick up and rebuild their lives as quickly as possible."

The bi-partisan legislation is sponsored by Reps. Barney Frank, D-Mass., and Judy Biggert, R-Ill.

Other sponsors include Rep. Earl Blumenauer, D-Ore; Rep. Gary Miller, R-Calif.; Rep. Gene Taylor, D-Miss.; Rep. Richard Baker, R-La.; Rep. Doris Matsui, D-Calif.; Rep. JoAnn Davis, R-Va.; Rep. Maxine Waters, D-Calif.; and Rep. Ginny Brown-Waite, R-Fla.

Ben McKay, PCI's senior vice president, federal government relations, said of particular concern to the trade group is a provision that would triple the time period for policyholders to file proof of loss from 60 to 180 days.

"This provision could add significant costs both immediately and in the future, with such additional costs ultimately to be borne by taxpayers," he said.

Mr. McKay also noted that the bill contains a provision that would require a "one page" description of the coverages the policy provides.

This requirement, albeit more than one page currently, was met though the passage and implementation of the Flood Insurance Reform Act of 2004," he said.

"Certainly, it is imperative that we address the solvency of the NFIP, both in the short term and in the long term, because this is a vital, necessary program for consumers," Mr. McKay said.

"A number of the bill's provisions work toward those goals by increasing the borrowing authority in the short term and enhancing mitigation efforts and homeowner outreach for the long term," he said.

"But we must be careful not to cancel out those positive steps by creating additional costs for a program that is already drowning in debt," Mr. McKay added.