Wicker Plans to Revive Wind-Vs.-Water Debate With Flood-Bill Amendment

NU Online News Service, Sept. 7, 2:31 p.m. EDT

A senator plans to revive the sensitive “wind-vs.-water” issue by introducing an amendment to the Senate bill reauthorizing the National Flood Insurance Program (NFIP) when it is marked up Thursday.

An aide to Sen. Roger Wicker, R-Miss., confirmed today his plans to offer the amendment that would split the difference.

The aide says the amendment is justified, stating that the senator notes that currently, insurance adjustors, usually employed by private wind insurers, were responsible for determinations of wind-vs.-water damage. 

“This potential conflict of interest was cited by the Government Accountability Office in its reports following Hurricane Katrina,” Wicker says. 

He adds, “My amendment would use scientific data to settle total loss properties after a hurricane.”

The amendment would create a “standardized loss-allocation” system to distribute losses between the NFIP and private or residual-market wind insurers following the total loss of any property that carries both flood and wind insurance.

The Wicker amendment would utilize data currently collected by the National Oceanic and Atmospheric Administration, academic institutions and private entities to allocate wind-vs.-water damages following significant storms.

Using a post-storm event formula developed under the amendment, damage would be determined by its source and attributed to wind or water peril, Wicker says. 

 The formula would be applied on a property-by-property basis so individual engineering characteristics of each home would be taken into account, he notes.

“This would allow accurate insurance settlements when no tangible evidence remains after a hurricane,” Wicker says.

The provision is not included in the House legislation, the Flood Insurance Reform Act of 2011, H.R. 1309, and, if included in the Senate bill, could complicate efforts to reconcile the two measures before the Sept. 30 deadline.

Eli Lehrer, the Heartland Institute's vice president for Washington, D.C. operations, says, “The fundamental idea in this bill solves one of the major quandaries facing the nation's current coastal insurance system. The current haphazard system for allocating claims between NFIP and wind insurers often leaves everyone involved worse off. This bill holds out the possibility of developing a fair, equitable system that serves everyone's interest.

“It's not perfect, but given that the system proposed is optional and will not require a meaningful commitment of tax dollars, it certainly seems like a worthwhile experiment.”

Others within the industry fear that such a program would cause more confusion for insurers and consumers in the aftermath of a major flood.

Earlier this year, Wicker proposed an identical plan as a standalone bill, the Consumer Option for an Alternative System To Allocate Losses Act of 2011, or COASTAL Act, S. 1091. According to that bill's summary and status, it was read twice and referred to the Committee on Banking, Housing, and Urban Affairs on May 26.