Obama rejects federal wind insurance for hurricanes

McClatchy NewspapersMay 12, 2009 

WASHINGTON — The Obama administration has quietly told Congress that it "strongly opposes" federal wind insurance legislation — surprising a Mississippi lawmaker who lost his home to Hurricane Katrina and who's spent more than two years fighting for wind coverage.

The legislation would permit homeowners who participate in the federal national flood insurance program to purchase wind coverage at actuarially set rates.

Homeowners in hurricane-prone states like Florida, the Carolinas and Texas have found wind coverage either expensive or impossible to find, forcing many states to form wind pools or, in the case of Florida, a state-owned insurance provider.

House Speaker Nancy Pelosi, D-Calif. has been a strong backer of the legislation, which passed the House of Representatives last session by a wide margin as part of the flood insurance reauthorization. It failed, however, in a lopsided 74-19 Senate vote.

A shell-shocked Rep. Gene Taylor, D-Miss., said he learned just a few days ago that Homeland Security Secretary Janet Napolitano and Craig Fugate, the nominee to head the Federal Emergency Management Agency, had written lawmakers in opposition to Taylor's legislation.

"I'm obviously extremely disappointed," Taylor told McClatchy," that an administration that ran on 'change you can believe in' did this without taking the time to talk to us."

"I'm particularly angry that they're bailing out AIG, but when it comes to the excessive cost of wind coverage, they're not helping the people of coastal areas," he said. American International Group is one of the nation's largest insurers.

Taylor settled a lawsuit with State Farm Insurance over compensation for wind damage to his waterfront home, which the 2005 hurricane destroyed.

In the first — and seemingly definitive — signs of an Obama administration position on the issue, Napolitano wrote House Financial Services Committee Chairman Barney Frank, D-Mass., on April 24, saying that private coverage was available and that a federal wind program would be too costly for the debt-ridden flood insurance program.

Fugate, Florida's director of emergency management, made the same points in written responses to questions from the Senate Homeland Security Committee, which confirmed him last month. He now awaits Senate confirmation after Sen. David Vitter, D-La., lifted his hold on Fugate Monday after resolving other Katrina-related issues.

"I oppose extending the federal government's role and increasing its liability for an insurance program that is readily available in the private sector and through state insurance plans," Fugate said. "Many carriers in Florida have told the state's insurance regulator that they would write the wind policies of insurers withdrawing from the state."

Taylor, however, isn't giving up, and wants to meet with Napolitano.

"I've just got to believe they're not in touch with coastal homeowners," he said. "This is the right thing we're pushing for."

Americans for Smart Natural Catastrophe Policy, a coalition of groups opposed to the plan, welcomed the Obama administration's position.

"We agree with FEMA Director-designate Craig Fugate that adding wind coverage to the NFIP is a bad idea," said Rebecca Wodder, the president of American Rivers, a member of the coalition, which also includes insurance companies. "Congress should instead focus its attention and resources on making communities more resilient to storms by investing in the protection and restoration of wetlands, floodplains and barrier islands."

SHIFTING WINDS

Here are FEMA director nominee Craig Fugate's written responses to a question from the Senate Homeland Security Committee:

Q: Representative Gene Taylor of Mississippi has reintroduced legislation in the House of Representatives that would add wind coverage to the National Flood Insurance Program (NFIP). Where do you stand on adding wind coverage to the NFIP?

A: I oppose adding wind insurance coverage to the NFIP for a number of reasons:

  • Coverage is available in the private sector and through state wind pools. Property owners are served by the private market, which provides catastrophic wind storm coverage without the need for federal aid. I oppose extending the federal government's role and increasing its liability for an insurance program that is readily available in the private sector and through state insurance plans. Many carriers in Florida have told the state's insurance regulator that they would write the wind policies of insures withdrawing from the state.
  • Voluntary federal wind coverage would create significant problems involving coordination of benefits, and adversely affect competition and selection among the various public and private wind programs.
  • Wind coverage would greatly increase the NFIP's exposure to catastrophic risks at a time when the program has a growing debt and accrued interest of over $19 billion.
  • The legislation requires federal wind insurance to be actuarially sound, as it should, hence, the insurance offered through a Federal program will not be less expensive than what is available in the private insurance market.
  • Unless communities adopt the international building codes without amendments, FEMA would be forced to review thousands of community building codes every three years and continuously monitor them to ensure compliance.
  • Building codes and standards do not dictate land use and zoning requirements, which have always been reserved for States to decide what is appropriate; and the term 'windstorm' includes any hurricane, tornado, cyclone, typhoon, or other wind event, yet American Society of Civil Engineers Minimum Design Loads for Buildings and Other Structures (ASCE 7-05) and the nation's model building codes do not address tornadoes.

ON THE WEB

Homeland Security Secretary Janet Napolitano's letter

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McClatchy Newspapers 2009

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