Election Results Could Increase Chances Of Long-Term NFIP Extension

NU Online News Service, Nov. 4, 3:26 p.m. EDT

WASHINGTON–The chances that the National Flood Insurance Program will be reauthorized for a long period by the next Congress have risen considerably through the Republican takeover of the House, according to industry officials and outside analysts.

They also point to the defeat–with strong industry funding–of both Rep. Gene Taylor, D-Miss., and Rep. Ron Klein, D-Fla., both strong advocates of changes to the NFIP that the industry opposed.

Rep. Taylor and Rep. Klein lost their seats in Congress, to Republicans Steven Palazzo and Alan West, respectively.

Jimi Grande, senior vice president of federal and political affairs at the National Association of Mutual Insurance Companies in Washington, said the defeat of Rep. Taylor means that "we have a renewed opportunity at meaningful NFIP reform without the looming bad policy proposal of wind inclusion."

Rep. Taylor had pushed for the Multi-Peril Insurance Act, H.R. 1264, which would have added wind coverage to the NFIP.

He had also pushed for language in any NFIP renewal bill that would prohibit insurers involved with the NFIP from using anti-concurrent causation language in their own homeowners policies to exclude coverage of wind damage solely because flooding also contributed to the loss.

He also supported language that would preempt state law by imposing added regulation and oversight of industry claims practices where damage is caused by both wind and flooding.

Provisions in both Louisiana and Mississippi exempting insurers from paying claims when both wind and flooding caused a loss–upheld by both federal and state courts–limited homeowners in both states from being fully repaid on claims resulting from hurricanes Katrina and Rita in 2005.

The NFIP has been in limbo since its last long-term reauthorization expired Sept. 30, 2008. Since then, temporary extensions have run out a number of times.

Mr. Grande added that the defeat of Rep. Klein, and the fact that at least eight new members of the Florida delegation are coming to Washington, means that the "'beach house bailout' can finally be put to rest as an idea and we can begin a conversation about creating a more sound solution based on market realities."

"Beach house bailout" is a term used by opponents of the Homeowners Defense Act, which would provide a federal backup to state catastrophe insurance programs. Rep. Klein had been the lead sponsor of the Homeowners' Defense Act, H.R. 2555.

"Voters made it clear: They don't want–or need–a government takeover of property insurance markets," said Eli Lehrer, national director of the Heartland Institute's Center on Finance, Insurance, and Real Estate.

"Both Rep. Taylor's district and Rep. Klein's district are places where hurricanes are major problems," he said. "Both men waged passionate efforts for their bills, but voters rejected them. This is a big win for taxpayers, the environment, and common sense."

Mr. Grande said Rep. Klein "was a prime target" because of his support of the Homeowners Defense Act.

"Trying to take Florida's mistakes and state-run pool and shifting it over to taxpayers isn't widely thought of as a reasonable solution to the problems of hurricanes in Florida." Mr. Grande said.

Mr. Grande added, "These two defeats improve chances of a 5-year reauthorization of the NFIP. That is the priority of the industry at the moment. We would also like to go back to building codes and having a good debate over how we make buildings stronger and safer."

According to Mr. Lehrer, the next Congress will likely take a much different tack on catastrophe issues.

"We're certainly going to see a major push to reauthorize the flood insurance program and, in a Congress sure to face lots of partisan wrangling, this is one place where Democrats and Republicans should be able to work together," he said.