Senate Committee Approves Flood Bill, No Wind Coverage

A U.S. Senate committee approved a bill to reform the federal flood insurance program without considering a House plan to extend coverage to protect against wind damage.

Published on October 18, 2007

Senators Charles Schumer, a New York Democrat, and Mel Martinez, a Republican from Florida, pulled an amendment that would have reduced the role of private insurers in coastal areas. Banking Committee Chairman Christopher Dodd said today it was unclear how much the provision would cost the government.

“I really couldn't in good conscience add something like this without understanding the implications,'' Dodd, a Connecticut Democrat, said at a hearing in Washington before the committee unanimously approved a bill without the provision.

Supporters in the House say expanding the National Flood Insurance Program would make coverage more widely available in coastal regions and eliminate disputes over the cause of damage. After Hurricanes Katrina and Rita struck in 2005, thousands of homeowners sued their insurers, saying the companies tried to pass off wind damage, which is covered by the industry, as flooding, which is covered by the government.

Companies like State Farm Mutual Automobile Insurance Co. and Allstate Corp. retreated from some areas and raised rates and deductibles after paying $57.9 billion in claims in 2005.

Five-Year Extension

The bill approved by the Banking Committee would extend the flood insurance program for five years, while phasing out subsidized rates for vacation homes and residences that have submitted multiple claims for water damage, Dodd said.

The House on Sept. 27 approved, 263-146, a version of the bill that included the wind coverage provision. President George W. Bush has threatened to veto wind coverage, saying it encourages irresponsible development.

“Shifting liabilities for windstorm damage from the private sector to the NFIP would be fiscally irresponsible,'' the White House Office of Management and Budget said in a statement last month that included the veto threat.

“The inclusion of windstorm damage insurance in the NFIP would mean that all taxpayers would be subsidizing insurance rates for the benefit of those people in high-risk areas,'' the OMB wrote.