Senate Advances Renewal of Flood Insurance without Wind Coverage

May 7, 2008

A bill to renew the National Flood Insurance Program (NFIP) passed a key test vote in the U.S. Senate Tuesday, with aides saying they expected final action on the legislation before the end of the week.

The Senate agreed by a 90-1 vote to proceed with consideration of the measure to reauthorize the NFIP, due to expire in September unless it is renewed by Congress.

The Senate bill would extend the program through 2013, while forgiving a $17 billion NFIP debt run up by the Federal Emergency Management Agency after 2005's Hurricane Katrina. FEMA manages the home flood insurance program.

Unlike a similar bill passed last year in the House , the Senate bill would not add wind damage coverage to the program. But insurance industry lobbyists said a wind add-on amendment may emerge as the bill undergoes debate on the Senate floor in coming days.

Insurers oppose adding wind coverage to the 40-year-old NFIP. Some lawmakers from coastal states support it.

Adding wind coverage would present major challenges to FEMA and could expose taxpayers to high costs, according to a congressional investigation report obtained by Reuters.

The Government Accountability Office (GAO) report said if wind coverage were added, as proposed in the House bill, FEMA would have to set wind hazard prevention standards, create a new rate-setting process and undertake major promotional efforts.

"Finally, FEMA would need to put staff and procedures in place to administer and oversee the new program, while it faces current management and oversight challenges with the National Flood Insurance Program (NFIP)," the GAO said.

Alabama Sen. Richard Shelby, senior banking committee Republican, called for further examination before expanding NFIP to cover wind damage. He cited studies that say such a move would vastly increase the program's risk exposure.

A broad coalition of environmentalists, state floodplain managers, fiscal policy conservatives and taxpayer and consumer activists oppose adding wind coverage to the program.

Congress has been working for months on reauthorizing the NFIP. The House bill does that, while also calling for creation of a federal program with both wind and flood coverage.

(Reporting by Kevin Drawbaugh, Editing by Toni Reinhold)