Editor’s Note: Wind, water and legislative storm

At the center of the controversy is a provision by Congressman Gene Taylor of Mississippi that would expand the NFIP to include an optional multiple peril policy — to allow property owners to purchase wind and flood coverage in a single policy.

The U.S. House of Representatives passed the Flood Insurance Reform and Modernization Act, H.R. 3121, by a vote of 263-146 on Sept. 27, heating up a topic already on fire. While supporting efforts to modernize and strengthen the National Flood Insurance Program (NFIP) — which was the original intent of the bill — the Bush Administration and much of the insurance industry are opposed the inclusion of wind coverage in the legislation passed by the House. At the center of the controversy is a provision by Congressman Gene Taylor of Mississippi that would expand the NFIP to include an optional multiple peril policy — to allow property owners to purchase wind and flood coverage in a single policy.

Insurance industry trade groups and agents’ organizations have weighed in on the topic. The American Academy of Actuaries explains their clear cut position in this issue’s “Closing Quote” on page 46.

Both the National Association of Professional Insurance Agents (PIA) and the Independent Insurance Agents and Brokers of America (the Big “I”) expressed general approval of the bill — except for the optional windstorm provision — lauding the multi-year reauthorization component and other modernizing aspects of the legislation. The Big “I” said while the addition of windstorm coverage serves to spur dialogue on the important issue of the availability and affordability of windstorm coverage in coastal communities, the organization has concerns with the inclusion of such coverage in the NFIP. Likewise, PIA noted that while well-intentioned, the provision would likely increase uncertainty over coverage issues and recommended its removal from the legislation.

National Association of Mutual Insurance Companies (NAMIC) Senior Director of Public Affairs Justin Roth said that including wind coverage in the bill again asks federal taxpayers to cover a peril that the private market is perfectly capable of covering. NAMIC said the bill as currently written is not one it can support.

The American Insurance Association (AIA) said the bill would result in a dramatic expansion of the NFIP — with the potential for huge deficits — and a fundamental realignment of both the NFIP and the private wind insurance market. It would also encourage building in hurricane-prone regions, putting more people and property in the path of devastating storms.

The Property Casualty Insurers Association of America (PCI) also opposes inclusion of the wind coverage in the bill, stating that the provision could “produce unintended negative consequences for millions of American insurance consumers.”

President George W. Bush has threatened to veto the bill if the Senate approves it. The administration said it supports efforts to reform the NFIP, but does not support the addition of coverage for windstorm damage or other provisions expanding coverage available through the federal program. “Shifting liabilities for windstorm damage from the private sector to the NFIP would be fiscally irresponsible,” the White House argued in a statement from the Office of Management and Budget.

Obviously the storm is just beginning, stay tuned.