New Orleans Times Picayune: Panel OKs federal wind coverage

By Bruce Alpert
Washington bureau

A U.S. House committee approved legislation Tuesday that would let property owners buy wind coverage through the National Flood Insurance Program.

The bill, approved 40-25 by the House Financial Services Committee, now goes to the full House, which passed the measure two years ago.

Prospects for enactment, however, remain dim. Two years ago, the Senate could muster only 19 voters for the measure. And the Obama administration has raised concerns that adding wind coverage to the federal insurance program, already nearly $19 billion in debt as a result of payments made after Hurricane Katrina, could be costly to taxpayers.

Backers of the measure, including lead sponsors Gene Taylor, D-Miss., and Steve Scalise, R-Jefferson, say the measure is needed to protect homeowners who Taylor said were "screwed" by their insurance companies after Hurricane Katrina. Scalise agreed.

"In many instances, the National Flood Insurance Program paid for damages that should have been paid for by the insurance companies, helping lead to the program's insolvency," Scalise said. "Creating a multi-peril policy will shore up the NFIP and make sure it is not subsidizing insurance companies like it did in the aftermath of Hurricane Katrina."

The insurance industry vowed a strong fight. Kathy Mitchell, federal affairs director for the National Association of Mutual Insurance Companies, said the bill "would shift an enormous amount of risk to the federal government that is, and should be, covered in the private market."

In other action Tuesday, the Financial Services Committee by voice vote approved a bill that would extend the flood insurance program through 2015.

The bill would allow homeowners whose properties are designated as being in flood zones by new FEMA maps to be given a five-year grace period to purchase mandatory flood insurance.

The bill, sponsored by Rep. Maxine Waters, D-Calif., also would let FEMA increase annual rates by up 20 percent, twice the current 10 percent limit on annual increases, and eliminate subsidies for people who own second homes in coastal areas, as well as for many commercial properties.

Another measure passed by the House committee would allow states to join national catastrophic insurance policies, driving down costs of catastrophic coverage in states with major threats of serious hurricanes, earthquakes or tornados.

"The federal government's response to Hurricane Katrina has unfortunately created an expectation that the government will provide similar financial assistance in future disasters," said Rep. John Campbell, R-Calif. "This bill would instead gives states, including my home state of California, the tools to set up effective disaster insurance programs by sharing risks across the country."

But opponents said it would produce expensive federal subsidies for wealthy coastal homeowners.

"It is appalling to think that taxpayers from across the country would be forced to effectively subsidize insurance coverage for those who want to live along the coast of Florida, especially during these difficult economic times," said Mitchell of the National Association of Mutual Insurance Companies. She called the bill "the beach house bailout."

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