In a letter to House Speaker Dennis Hastert (R-Ill.), Property Casualty Insurers Association of America (PCI) President and CEO Ernie Csiszar urged congressional support for a proposal by Mississippi Gov. Haley Barbour to provide federal grants to homeowners whose homes were destroyed by floods resulting from Hurricane Katrina but who were uninsured for such losses.
The proposal would authorize federal grants of up to $150,000 to each of the estimated 35,000 homeowners whose homes meet specific criteria.
Those criteria include:
• The flood damaged home must be located outside federal government-established flood zones;
• The home must have been owner-occupied at the time the damage occurred; and
• The homeowner must have had a homeowners insurance policy (which typically covers wind damage, but specifically excludes flood damage) in force at the time the storm hit.
“Due to Hurricane Katrina’s unprecedented flooding and storm surge – much of which occurred outside known flood zones – thousands of responsible homeowners are finding that they are uninsured for such losses. This jeopardizes these individuals’ opportunity to rebuild and threatens to paralyze the Gulf Coast’s overall economic revitalization,” Csiszar wrote.
The plan would not only bring needed revitalization funds to the ravaged Gulf Coast region, but would also reduce losses and the need for government financial assistance in the wake of future natural disasters.
In order to receive the $150,000 grant, homeowners must rebuild their homes to comply with new FEMA flood advisory maps, abide by stricter building codes during reconstruction, and agree to maintain flood insurance on the rebuilt property.
Several recent proposals on Capitol Hill have suggested offering consumers the opportunity to purchase flood insurance retroactively, which could have serious implications on the future effectiveness of any federal flood program.
“Offering the retroactive purchase of flood insurance would create a moral hazard that would destroy the solvency and effectiveness of the federal flood insurance program, “Csiszar said. “Governor Barbour’s plan is an investment of federal funds, not a bailout. It would effectively produce the same desired results, but would do so by establishing common sense incentives that will promote a stronger and more resilient infrastructure along the Gulf Coast. PCI strongly urges Congress to support Governor Barbour’s plan to provide responsible relief funding to individuals on the Gulf Coast.”
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