The House Rules Committee has granted members until 5 p.m. Sept. 25 to submit for consideration amendments to H.R. 3121, the Flood Insurance Reform and Modernization Act. Approved in July by the House Financial Services Committee, the bill incorporates a proposal from Rep. Gene Taylor, D-Miss., enabling the purchase of coverage for hurricanes, tornados, cyclones, typhoons and other wind events through the NFIP.
According to Brian Martin, Taylor’s policy director, the leadership would like to see the bill scheduled for a Sept. 27 floor vote. Taylor, who lost his own Mississippi home during Hurricane Katrina and subsequently filed suit against carrier State Farm, introduced the legislation in response to what he said he believed were widespread consumer abuses and conflicts of interest by Write Your Own insurers in the adjustment of claims as either wind- or water-related.
The bill's windstorm provisions have support from House Speaker Nancy Pelosi, D-Calif., and the measure is expected to pass the chamber, despite widespread industry opposition. Insurers previously had strongly supported a flood reform bill that passed the House unanimously in June 2006. Like that earlier bill, H.R. 3121 would phase out the NFIP's premium subsidies for commercial properties and second homes, introduce coverage of additional living expenses and business interruption, and raise maximum policy limits for the first time since 1994.
"While NAMIC strongly supports most of the reforms in the flood bill, we would encourage the House to remove the provision that would add wind coverage to the NFIP," said Justin Roth, senior federal affairs director for the National Association of Mutual Insurance Companies. "We believe that by adding wind to the NFIP, this legislation would double the exposure to a program that is already almost $20 billion dollars in debt."
The windstorm provisions’ political outlook appear to have been buoyed by a new report from the nonpartisan Congressional Budget Office that suggests introduction of the coverage would have “no significant effect” on the federal budget deficit. The Federal Emergency Management Agency has estimated 2005 flood claims topped $23 billion, compared with only $14.6 billion of combined claims paid in the NFIP's entire 37-year history. Since August 2005, Congress has voted three times to expand the program's borrowing authority to pay outstanding claims—ordinarily just $1.5 billion— with President Bush last approving a temporary expansion to $20.78 billion in March 2006.
The flood reform bill would raise the program’s borrowing authority to $21.5 billion, which CBO noted would result in a $725 million increase in 2009 direct spending. Budget officials also note the legislation calls for $1.8 billion in appropriations over the next five years to improve flood mapping, and they expect provisions that raise civil penalties on lending institutions that fail to enforce mandatory coverage provisions will raise an addition $1 million annually.
In their report, the CBO found the addition of windstorm coverage and expansion of available coverages for structures and their contents would be more or less offset by the bill's plan to raise the cap on annual premium increases from 10% to 15%. CBO anticipates the change would yield an additional $3.1 billion in receipts over the next decade, but that those funds would be spent to cover operating expenses.
Paul Kangas, director of federal government relations for the Property Casualty Insurers Association of America, faulted the CBO for adopting an inconsistent approach to insurance projections. He noted that in assigning an $8.4 billion score to the Terrorism Risk Insura