WASHINGTON, Sept 16 (Reuters) - A senior Senate Republican urged the House of Representatives on Tuesday to back down and accept the Senate's terms in negotiations to renew the U.S. flood insurance program, set to expire in two weeks.
As Texas struggled to recover from Hurricane Ike and the Midwest from heavy flooding, insurance lobbyists said Congress was locked in a standoff over the future of a 40-year-old federal program that insures millions of American homeowners.
Alabama Sen. Richard Shelby, the top Republican on the banking committee and a veteran of insurance legislation, told reporters, "We've got a good bill ... I hope the House will take our bill. If they don't, they're making a mistake."
Legal authority for the National Flood Insurance Program (NFIP) will expire on Sept. 30 unless the Senate and the House can reconcile their differences over whether to add wind damage coverage to it, and whether to forgive its $18-billion debt.
Expiration of the program could rattle the already shaky housing market since federally backed mortgages needing flood coverage could not close while the program is in limbo.
"The devastation of Hurricane Ike and the flooding in the Midwest have underscored how crucial it is that Congress renew this vital program," said David Sampson, president of the Property Casualty Insurers Association of America.
"Time is short, and the consequences of allowing this vital program to expire would be serious," he said. "Not only would 5.5 million policyholders lose the security of flood coverage, but there could also be dire consequences for the nation's economy."
Steven Adamske, a spokesman for House Financial Services Committee Chairman Barney Frank, said: "We have been meeting with Senate staff. Discussions have been under way. We are well aware of the Sept. 30 deadline and we want to get this done."
TEMPORARY EXTENSION POSSIBLE
If lawmakers cannot reach an agreement by Sept. 30, Shelby said, a temporary extension could be needed. "I'd hate to see it, but that's generally what happens," he said.
Big insurers with a stake in the debate include Allstate Corp (ALL.N), Nationwide Financial Services Inc NFS.N, Fidelity National Financial Inc (FNF.N), Travelers Cos Inc (TRV.N) and Hartford Financial Services Group Inc (HIG.N).
The NFIP has been swimming in red ink since Hurricane Katrina slammed into the U.S. Gulf Coast in 2005 with high winds and a massive flood surge. The devastating hurricanes of 2004-2005 revealed deep problems within the NFIP, but efforts to fix it have resulted in disagreement.
The Senate voted in May to extend the NFIP until 2013 and forgive its debt. The House of Representatives also has voted to extend the program, but added a controversial wind damage coverage clause to its bill, and refused to forgive the debt.
Negotiators from both chambers have been expected to settle their differences in a compromise bill to send to President George W. Bush, but that still has not happened.
Bush has threatened to veto the House bill. The insurance industry opposes adding wind coverage, as does Shelby.
"We're not going to take up wind insurance," he said.
He called a possible wind coverage pilot program "bad for the economy. I think the president would veto it. If he didn't, I'd be shocked. A lot of us would filibuster it," he said, referring to a method of obstructing a measure through extended debate.
Seven insurance industry groups -- which often disagree among themselves on other matters -- banded together to sign a letter sent on Tuesday to congressional leaders urging action. (Reporting by Kevin Drawbaugh; Editing by Tim Dobbyn)