NU Online News Service, July 22, 9:38 p.m. EDT
The Obama administration said it opposes legislation that will be considered by the House that would add wind coverage to the National Flood Insurance Program (NFIP).
The House was expected to vote on the measure today.
The administration statement came out just after 4 p.m. on July 21, as the House Rules Committee prepared to clear H.R. 1264, the Multiple Peril Insurance Act, for floor action this morning.
In its statement of policy, issued by the Office of Management and Budget, the administration said that although it believes in strengthening the NFIP for the benefit of policyholders and taxpayers, "the central rationale for the program–the difficulty of obtaining flood insurance through either the private market or state programs–simply does not apply to windstorm insurance in most markets."
The administration statement further said that "because the legislation appropriately requires that a federal wind insurance program be actuarially sound, the insurance offered through a federal program may not be any less expensive, and could be more expensive, than what is currently offered by private insurers and/or by the states."
As a result, the statement added, "expanding NFIP to cover windstorm insurance would unnecessarily duplicate available insurance products and could 'crowd out' such products where they are offered, while offering little to no savings to the American public.
"At a time when the NFIP is already facing serious challenges, the administration cannot support such an expansion."
The administration statement was immediately cited in letters to House members by the Property Casualty Insurers Association of America, the American Insurance Association, the National Association of Professional Insurance Agents and SmarterSafer.org.
PCI's statement charged, in a statement reminiscent of the debate over healthcare reform, that H.R. 1264 amounts "to a government take-over of this private homeowners' insurance marketplace."
In a letter sent to all members of the House, David Sampson, PCI president and CEO, said, "This approach is a mistake that could deliver devastating results to the U.S. jobs market and add billions to the federal deficit," he said.
The legislation is sponsored by Rep. Gene Taylor, D-Miss., and 22 other members of the House.
In comments to the PCI about its objections to adding wind to the program, Brian Martin, Rep. Taylor's policy director, indicated that NFIP would be paying commissions to private agents to sell the policies; paying administrative subsidies to private insurance companies or private contractors to handle the policies; and paying loss adjustment expenses to private companies or private contractors to adjust claims.
"All the money would go to the private sector without them bearing the risk or the capital costs," Mr. Martin said.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.