Copyright 2009 A.M. Best Company, Inc.All Rights Reserved BestWire

February 26, 2009 Thursday 02:56 PM EST

504 words


House Passes Short-Term Extension for Flood Program

Raymond J Lehmann

WASHINGTON

The U.S. House has passed legislation extending the National Flood Insurance Program for six months with no changes in its structure, as part of a $410 billion omnibus appropriations bill that will fund the federal government through the remainder of Fiscal Year 2009.

Cleared by a 245-178 margin, H.R. 1105 would extend statutory authority for the 40-year-old NFIP through Sept. 30. Without an extension, it would expire March 6, along with the rest of a $487.7 billion continuing resolution passed in September 2008. The bill, which consolidates nine appropriations bills left over from 2008, is expected to be taken up by the Senate the week of March 2.

The short-term extension for the NFIP likely pushes debate over the program's long-term future including whether it should begin offering a "multiperil" policy that also includes windstorm coverage to this summer. Separate bills that each would have extended the program for five years passed the House in October 2007 and the Senate in May 2008. But progress stalled on resolving differences between the two bills, including provisions of the House bill empowering the NFIP to begin offering windstorm coverage through optional personal and commercial multiperil policies.

The Bush administration had threatened to veto any bill that included windstorm coverage, a proposal pushed hard by House Democrats led by Rep. Gene Taylor, D-Miss. but opposed by most homeowners insurers. Other changes would have phased out some premium subsidies, raised the NFIP's maximum coverage limits for the first time since 1994 and introduced coverage of additional living expenses, business interruption, and finished basements.

"While it would be preferable for Congress to pass a long-term extension with much-needed flood program reforms, we understand that the best that can be done right now is to make sure the NFIP does not lapse in March. Expiration of the program could have dire consequences, not just for policyholders but also for the nation's economy in general," said David A. Sampson, president and chief executive officer of the Property Casualty Insurers Association of America, in a statement.

Pay-as-you-go budgeting rules also present issues for a long-term NFIP extension, particularly on how to treat the more than $17.5 billion the NFIP borrowed in the wake of 2005's record hurricane season. Ordinarily just $1.5 billion, the NFIP's borrowing authority was raised to $20.75 billion in March 2006, and Congress would need to raise the debt ceiling again if 2008's claims exceed that threshold.

Established in 1968 by the National Flood Insurance Act, the NFIP has more than 5.2 million commercial and residential flood insurance policies in force in more than 20,000 participating communities. More than 95% of the policies are sold and serviced through Write Your Own insurers, which are paid by the Federal Emergency Management Agency for marketing the policies and processing claims.

(By R.J. Lehmann, Washington bureau manager: raymond.lehmann@ambest.com)

February 27, 2009

Copyright © 2009 LexisNexis, a division of Reed Elsevier Inc. All Rights Reserved.
Terms and Conditions Privacy Policy