The House of Representatives approved an overhaul of the National Flood Insurance Program late this week, after a long delay that made many in the Gulf region nervous during what is expected to be a busier than normal hurricane season.
The legislation approves operation of the program for five years, allowing for some premium and deductible increases in order to make the fund more solvent. The insurance program was left $18.75 billion in the red in 2005 after Hurricane Katrina hit New Orleans. The new bill authorizes a raise in the annual limit of premium increases from 10 to 20 percent, raises annual deductibles and increases maximum limits to $335,000 for residences and $670,000 for businesses.
Representative Maxine Waters, D-California, the chief sponsor of the legislation, said that the bill provides a delay in the premium increase for five years, and will incremental over the five years that follow it. As FEMA has remapped and reclassified many areas of the US as now belonging in flood plains (and thus now requiring the insurance), the congresswoman provided the provision to ease the "sticker shock" of the cost to homeowners.
After passing the House 329-90 Thursday, the bill will now move to the Senate, where Waters is concerned the bill may yet again stall. The flood program has already lapsed three times this year due to congressional inaction, and the congresswomen said that during theses lapses some 1,200 people a day are unable to close on home purchases due to regulations that require flood insurance.
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The bill would phase out subsidies for vacation homes, second homes and non-residential properties, and well as ending subsidies for properties repetitively flooded for severe losses. Representative Shelley Moore Capito, R-West Virginia said that property repeatedly hit with severe flooding accounts for 1 percent of all policies but 30 percent of claims.
The bill had plenty of criticism, notably from Representative Candice Miller R-Michigan, who said her state was an "ATM machine" for the flood program, paying out $200 million since 1978 in premiums, and receiving only $44 million in claims.
Representative Gene Taylor, D-Mississippi felt the bill did not provide enough coverage. The representative complained that he was unable to add windstorm damage to the program. Gulf Coast legislators agreed that private insurers avoided paying damages from Katrina even in inland areas, asserting that the damage was caused by floods (which are federally subsidized) rather than be wind (which is not).
Both Obama and Bush administrations opposed adding wind coverage to the program, for fear that the provision would greatly increase the programs risk exposure and cost. In the end Taylor did manage to get a last minute amendment accepted that required private insurance to make what AP described as "fair adjustments" when property suffers both wind and flood damage.
The Taylor amendment was opposed by the American Insurance Association, who gave approval to the original language of the bill. Leigh Ann Pusey, AIA president, said the amendment would force many private insurers to to take a hard look at whether they want to continue participating in the program."
