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House Appropriations Bill Calls for Six-Month Flood Insuranc

 

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February 24, 2009 Tuesday 02:51 PM EST

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House Appropriations Bill Calls for Six-Month Flood Insurance Extension

Raymond J Lehmann

WASHINGTON

The National Flood Insurance Program would be extended for six months with no changes in structure, under provisions included in a $410 billion omnibus appropriations bill set for floor debate later this week.

The short-term extension, through Sept. 30, would push debate over the program's long-term future -- including whether it should begin offering a "multiperil" policy that also includes windstorm coverage -- to this summer. Without an extension, statutory authority for the 40-year-old NFIP would expire March 6, along with the rest of a $487.7 billion continuing resolution passed in September.

Expected to be enacted quickly, the omnibus bill would replace the CR and provide funding for daily operations of most federal agencies for the remainder of the 2009 Fiscal Year.

"This bill works in harmony with the economic recovery package, making investments that address the country's immediate needs while investing in our long-term economic strength," House Appropriations Committee Chairman David Obey, D-Wis., said in introducing the measure.

Separate bills that each would have extended the program for five years passed the House in October 2007 and the Senate in May of this year. But progress stalled on resolving differences between the two bills, including provisions of the House bill empowering the NFIP to begin offering windstorm coverage through optional personal and commercial multiperil policies. Other changes would have phased out some premium subsidies, raised the NFIP's maximum coverage limits for the first time since 1994 and introduced coverage of additional living expenses, business interruption, and finished basements.

"Given the current economic crisis, it's not surprising that Congress has decided to punt on this issue," said Eli Lehrer, senior fellow at the Washington-based Competitive Enterprise Institute. "But I am still disappointed. This simply puts off the absolutely necessary action of changing the program in a fundamental way, reforming it, and making America safer."

The Bush administration had threatened to veto any bill that included windstorm coverage, which were pushed hard by House Democrats -- led by Rep. Gene Taylor, D-Miss. -- but opposed by most homeowners insurers.

"Keeping the NFIP in place is crucial in order to protect existing policyholders as well as the nation's economy in general," said Cliston Brown, spokesman for the Property Casualty Insurers Association of America. "We will continue to work with Congress to move as soon as practicable on a long-term extension to renew and reform this vital program and restore its fiscal soundness."

Pay-as-you-go budgeting rules also present issues for a long-term NFIP extension, particularly on how to treat the more than $17.5 billion the NFIP borrowed in the wake of 2005's record hurricane season. Ordinarily just $1.5 billion, the NFIP's borrowing authority was raised to $20.75 billion in March 2006, and Congress would need to raise the debt ceiling again if recent claims exceed that threshold. As of December 2007, the Federal Emergency Management Agency estimated the program remained $17.3 billion in debt, and the program has since accrued further claims arising out of 2008's Midwest and Northeast floods, tropical storms Fay and Hanna and hurricanes Gustav and Ike.

"The Big I is pleased to see that an NFIP extension through Sept. 30 is included," said Charles Symington, senior vice president of government affairs with the Independent Insurance Agents & Brokers of America. "This program, which is so important to thousands of consumers across the country, cannot be allowed to lapse."

Established in 1968 by the National Flood Insurance Act, the NFIP has more than 5.2 million commercial and residential flood insurance policies in force in more than 20,000 participating communities. More than 95% of the policies are sold and serviced through Write Your Own insurers, which are paid by the Federal Emergency Management Agency for marketing the policies and processing claims.

(By R.J. Lehmann, Washington bureau manager: raymond.lehmann@ambest.com)

February 25, 2009

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