Another Bid To Add Wind Cover To NFIP

WASHINGTON–Plans by Democratic lawmakers to alter a National Flood Insurance Program reform bill by adding language allowing NFIP to provide windstorm coverage is creating concern among insurers.

“It is unfortunate that we are taking a flood reform bill that had strong bi-partisan and industry support and bogging it down with a very controversial addition that will create a great deal of opposition to the overall bill,” said Justin Roth, a senior director at the National Association of Mutual Insurance Companies.

The windstorm coverage provision in the legislation introduced yesterday is based on language in H.R. 920, a bill authored by Rep. Gene Taylor, D-Miss., that also would have expanded the NFIP to include windstorm coverage.

Rep. Taylor's bill, however, ran into a roadblock when a Treasury official expressed Bush administration opposition to the idea at a House Financial Services Subcommittee hearing earlier this week.

However, another lobbyist, who asked not to be named, cautioned that adding an all-perils provision, which would cover windstorm, to the overall NFIP reform bill may get it to the House floor, but it does not mean it will be approved once it arrives there.

“In several recent meetings with industry representatives, Rep. Barney Frank, D-Mass., chairman of the committee and author of H.R. 1862, has indicated that he will support the all-perils language as a part of the reform package,” according to the lobbyist.

Part of the package would increase borrowing authority for the NFIP, which has been debt-ridden since it was hit with a slew of claims after the 2004 and 2005 hurricane seasons. The bill, as now revised, has been renumbered HR 3121.

Rep. Frank, the lobbyist noted, “has said that he expects a floor amendment to strip that [all-perils] language from the legislation, and his support of the broad flood reform is not contingent upon the passage of the all-peril provisions.”

Industry groups representing property-casualty companies have maintained a strong opposition to the NFIP expansion proposed by Rep. Taylor, arguing that a strong private market for wind coverage already exists.

Additionally, the groups have questioned whether the Taylor legislation's requirement that windstorm coverage be offered at actuarially sound pricing will be able to withstand political pressure to lower rates for homeowners.

Ben McKay, senior vice president of federal government affairs for the Property Casualty Insurers Association of America, said: “Including wind coverage within the NFIP will create artificial subsidies, thereby essentially raising rates for consumers in inland parts of the country who are not subject to the same kinds of wind-damage risks faced by policyholders on the coasts.

“It is hard to believe that Congress wants to give more responsibility to a failed government program. I wouldn't invest in a company that had inadequate cash flow and $17.5 billion of debt.”

Other reforms already contained in the flood program reform legislation would call for a study of expanding the mandatory purchase requirement for flood insurance to the natural 100-year floodplain, and for the phasing out of subsidized rates for nonresidential properties or secondary homes.