AIA Urges Flood Insurance Extension Without Wind Coverage

"While we strongly support the Committee's effort to reauthorize and reform the National Flood Insurance Program, AIA must stand in strong opposition to the Homeowners Defense Act and the Multiple Peril Insurance Act," her letter said.

The flood bill has AIA support she explained because, "A long-term reauthorization of the NFIP is of great importance. The recent lapses in the NFIP due to the use of short-term extensions has caused disruptions to homeowners, businesses and hindered real estate closings nationwide."

Moving forward on a long-term NFIP reauthorization, wrote Ms. Pusey, will bring stability to the market and the proposed bill "improves the program and promotes its fiscal soundness and we urge its expedient consideration."

Concerning the Homeowners Defense Act, which has as its expressed aim ensuring the availability and affordability of homeowners' insurance coverage for catastrophic events, AIA said it is likely to encourage the growth of existing state programs, and the establishment of new ones.

"Although state property insurance programs are meant to serve as markets of last resort, in reality, they displace private market insurance and reinsurance. Moreover, they encourage a state to warehouse its catastrophic risk within the state, rather than spread risk through global reinsurance markets," Ms. Pusey said.

She mentioned that the bill does not require a state program to charge risk-based premiums, maintain adequate reserves, establish a solid, private-market reinsurance program, or manage its finances to an acceptable level of risk. "In other words, the legislation does not require that the state program have any 'skin in the game,'" her letter said.

The Multiple Peril Insurance Act, which would add wind damage coverage to the National Flood Insurance Program, has AIA opposition, Ms. Pusey wrote, because a "GAO study done on this proposal warned of the operational challenges and potential exposure of the federal government to a huge and potentially under-funded liability for hurricane wind damage."

In AIA's view, "The Congressional focus should be on returning the NFIP to financial soundness, not adding a coverage that is now available in every state through either the traditional private market or state residual markets"

The Homeowners Defense and Multiple Perils bills, " do nothing to expand true property insurance underwriting capacity. Rather , they encourage warehousing risk while expanding federal taxpayer exposure," AIA's letter said.