The U.S. Senate last week officially rejected a bid by Gulf state senators to add wind coverage to a financially strapped federal program that provides flood insurance.
Lawmakers from Louisiana and Mississippi cited problems that occurred after Hurricane Katrina and other big 2005 storms when private insurers covering wind damage claimed that destruction to property resulted from flooding, thus shifting the burden of payments to taxpayers.
But the Senate voted 73-19 against the amendment by Sen. Roger Wicker, R-Miss., that would have provided optional multiple peril insurance as part of the 40-year old National Flood Insurance Program.
The Senate is debating legislation to bail out and overhaul the program, which expires at the end of September.
The Senate bill would forgive the more than $17 billion the Federal Emergency Management Agency owes the U.S. Treasury and restore fiscal integrity by requiring a larger deductible, requiring more at-risk homeowners to buy insurance, ending subsidies to some vacation homes and businesses, and increasing the allowable annual rate increase from 10 percent to 15 percent.
The flood insurance program, which is run by FEMA, operates in some 20,000 communities that adopt and enforce local floodplain maintenance plans. Now with 5.5 million policyholders, it generally paid its own way through premiums until hit by the catastrophic damage of Katrina.
The House passed its version of the bill in September with a new wind damage provision. It was championed by Rep. Gene Taylor, D-Miss., whose home was destroyed by Katrina. Taylor said his roof ended up 450 feet from his home but the insurance adjustor claimed there was no evidence of wind damage. He later reached a settlement with his insurance company.
“Property owners shouldn’t have to go to court to fight over whether it was wind or water that destroyed their home or business,” Wicker said.
Fellow Mississippi Republican Thad Cochran added that many private insurers in coastal regions no longer offer wind insurance, and homeowners must turn to state pools where the premiums can be prohibitively expensive.
But Sens. Christopher Dodd, D-Conn., and Richard Shelby, R-Ala., the chairman and top Republican on the Senate Banking Committee, opposed the wind damage amendment, saying it could expose the program to unacceptable risk exposure at a time when it was trying to recover from bankruptcy.
“We have no idea what the cost of this program would be,” Dodd said.
The Government Accountability Office, in a study released this week, said not requiring adjustors to distinguish between wind and floods could expedite claim payments and reduce the potential for lawsuits. But it also warned that an unknown portion of risk exposure now held by state wind programs, almost $600 billion, could be transferred to the federal government.
The White House, in a statement, said it supports passage of the bill but would recommend a presidential veto if a wind provision was added. “Shifting liabilities for windstorm damage from the private sector to the NFIP would be fiscally irresponsible,” it said.
The insurance industry also came out against expanding the scope of the program. The Property Casualty Insurers Association of America said federal windstorm insurance “would needlessly displace the private market, disrupt existing state funds and create a significant burden for U.S. taxpayers.”
The bill is S. 2284
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