House panel votes to add wind coverage

House panel votes to add wind coverage

Washington Bureau - Friday, July 27, 2007

WASHINGTON – The House Financial Services Committee agreed Thursday to add optional wind coverage to the National Flood Insurance Program, brushing aside objections that such a major step needed more study.

The bill by U.S. Rep. Maxine Waters, D-Calif., would also increase overall coverage limits, phase out subsidized flood insurance rates for businesses and vacation homes, and authorize spending up to $400 million annually for the next five years to pay for flood map updates.

The subsidized rates generally apply to structures built before the early 1970s. For vacation homes in that category, the bill would allow flood insurance administrators to raise rates by 25 percent annually until the full risk-based premium is reached. For subsidized business structures, rate increases of 20 percent annually would be permitted.

In voting 38-29 to send the bill to the full House, the committee broke largely along party lines, with Democrats solidly in support and most Republicans opposed. In arguing for the addition of wind coverage, Chairman Barney Frank, D-Mass., pointed to the wave of “wind” vs. “water” disputes that followed Hurricane Katrina in 2005.

For many claims, insurance companies attributed storm damage to water – and thus covered under the federally supported flood insurance program – rather than wind, which would fall under a typical homeowners’ policy.

“There are people who (would) like to get a common policy,” Frank said.

But largely because of Katrina claims, the flood insurance program is more than $17 billion in debt to the federal treasury. Critics say it can ill afford to take on additional responsibilities. At Thursday’s hearing, the committee’s top Republican, U.S. Rep. Spencer Bachus of Birmingham, complained that adding wind coverage would amount to government nationalization.

“We’re basically abandoning the private market approach to insuring against wind damage,” Bachus said.

Noting that the National Flood Insurance Program doesn’t come up for renewal until late next year, Bachus argued that a closer look at the potential ramifications was in order.

“We have time for a study,” he said. But on a 37-30 vote, also largely along party lines, the committee swatted down an amendment by U.S. Rep. Judy Biggert, R-Ill, that would have dropped wind coverage from the bill.

The flood insurance program has almost 54,000 policies in effect in Alabama, the bulk of them in Mobile and Baldwin counties, according to the most recent statistics.

The vote represented a victory for U.S. Rep. Gene Taylor, a Mississippi Democrat who has tirelessly pushed the issue. Still to be seen is whether the addition of wind coverage complicates the measure’s chances of winning final congressional approval.

Much of the influential insurance lobby is opposed. At a hearing earlier this month, representatives for state insurance regulators, state flood plain managers and a conservation organization also voiced reservations. A vote by the full House has not yet been scheduled.

There is much talk over this, here are the results of a Goggle search.