House votes to expand flood insurance to wind damage

WASHINGTON — The House voted Thursday to expand the federal flood-insurance program to include wind damage, a change inspired by Hurricane Katrina hitting the Gulf Coast region but with repercussions for all coastal areas.

The 263-146 vote was bipartisan, as 218 Democrats and 45 Republicans voted for the bill despite a White House veto threat. Only one Democrat voted against it, New York Rep. Brian Higgins. There's no companion Senate bill, but House supporters are looking to Senate Minority Whip Trent Lott, R-Miss., who's been generally supportive of the "multi-peril" insurance approach.

The vote made good on promises by House Speaker Nancy Pelosi, D-Calif., to the Gulf region to help restore the economy by staving off lengthy insurance disputes.

The Flood Insurance Reform and Modernization Act of 2007 would enable policyholders in the flood insurance program to purchase wind policies, as well as making revisions in the overall program.

In an emotional speech, Rep. Gene Taylor, D-Miss., the author of the provision adding wind coverage, recounted his personal experience after Katrina.

He described the devastation to the Mississippi Gulf and the losses of his oceanfront Bay St. Louis house and Lott's Pascagoula home.

"Between my house and Senator Lott's house there are maybe 40 miles, and only a handful of houses were left standing," he said.

Thanking the many people and sectors who helped Katrina victims, Taylor left no doubt as to his motivation for the bill: "About the only group that didn't try to help the people of South Mississippi were the insurance industry."

Insurers oppose the legislation.

"This bill would result in a dramatic expansion of the (National Flood Insurance Program) — with the potential for huge deficits — and a fundamental realignment of both the (flood program) and the private wind-insurance market," said Marc Racicot, the president of the American Insurance Association. "It would also encourage building in hurricane-prone regions, putting more people and property in the path of devastating storms."

Taylor said the need for a federal wind provision came down to insurers' refusals in many cases to recognize damage caused by wind. Hurricane winds blew the roofs off houses or caused other damage, followed by the storm surge, which caused flooding. The insurance companies, which also administer the federal program, said the losses were due to flooding, which the federal government covers.

House Financial Services Committee Chairman Barney Frank, D-Mass., the bill's manager on the floor, said insurers shouldn't have the leverage to choose between wind and water.

"It is inherently difficult if not impossible to say, 'Was it wind? Was it flood?' " he said. "It is impossible to tell."

By putting "multiple perils" in one federal program, he said, policyholders would be treated equitably.

Rep. Shelley Moore Capito, R-W.Va., a main opponent of the bill, said she objected to its expanding taxpayer liability and further straining the program's administrative capabilities.

"This program is already financially unstable," she said. It had to borrow nearly $18 billion more than it takes in to pay Katrina-related claims.

Under the bill, policyholders in the flood insurance program would be able to purchase wind policies, though wind coverage alone wouldn't be available.

The multiple-peril residential policy limit would be $500,000 for the structure and $150,000 for contents. The bill increases the maximum coverage for flood insurance policies from $250,000 to $335,000 for residences.

Frank said the expanded program would pay for itself through actuarially determined premiums.

The legislation also makes revisions in the program, increases premiums, phases out subsidized rates paid by vacation-home owners and raises its borrowing authority.


View H.R 3121, the Flood Insurance Reform and Modernization Act of 2007.