With its chairman proclaiming the program is at a “crossroads,” the U.S. Senate Banking Committee this week advanced bipartisan legislation to bolster the nation’s debt-ridden flood insurance program.
Insurance trade groups generally support the legislation, the Flood Insurance Reform and Modernization Act of 2006 (FIRM), designed to reform and refund the program that has an estimated $23 billion debt from claims arising from hurricanes Katrina and Rita.
The Senate legislation would phase-out certain subsidies for second homes, repetitive loss properties and business properties; make state financial institutions require coverage on mortgages within flood zones; implement other provisions designed to boost participation in the federal program and raise the program’s borrowing authority.
“We are not here to address a Katrina problem, a regional problem, or even a new problem. We are here to address a national problem created by the operation of a poorly designed program,” said Sen. Richard Shelby (R-Ala.), Banking Committee chairman, at the bill’s markup session. “From its inception and until recently, the best thing the National Flood Insurance Program had going for it was a run of good luck Even with such good fortune, however, the program could not avoid running in the red on some occasions. As the weather cycle changes, and we move into a period of more powerful and frequent storms, it is important for Congress to confront the program’s deficiencies.
“Indeed, we stand at a crossroads. We can reform this program or we can continue to allow it to flounder,” Shelby said.
The National Association of Mutual Insurance Companies (NAMIC) commended Shelby and Ranking Member Sen. Paul Sarbane (D-Md.) for seeking to reform the National Flood Insurance Program (NFIP).
“NAMIC greatly appreciates Chairman Shelby’s leadership in crafting legislation to accomplish this goal. In particular, Chairman Shelby’s legislation establishes the framework for a federal flood insurance program that will be able to continue to serve policyholders in need of flood insurance while protecting American taxpayers,” said NAMIC Senior Vice President for Federal Affairs David A. Winston.
The American Insurance Association (AIA) also signaled its support.
“The bill provides the framework for a federal flood insurance program that will be able to continue to serve policyholders in need of flood insurance while protecting American taxpayers,” the AIA said in a statement.
A House flood program bill (HR 4973) passed the House Financial Services Committee in March.
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