Coalition forms to oppose flood insurance plan

By Lilla Zuill

NEW YORK, March 26 (Reuters) - A coalition of environmentalists, consumer advocates and insurers has formed to oppose proposed legislation that would expand a federal flood insurance scheme.

The measure would add coverage for wind damage, which the coalition says could prove costly for taxpayers and send the wrong message about developing environmentally-sensitive, catastrophe-prone areas.

Proponents of revamping the federal plan say home and business owners need to have access to wider coverage, after many property owners were left without adequate coverage in the wake of 2005's Hurricane Katrina, which caused record damage along the Gulf Coast.

The coalition -- which counts the Consumer Federation of America, the National Wildlife Federation and the Reinsurance Association of America among its members -- laid out its stand in a letter to influential senators this week.

"Taxpayers nationwide will be left to pay the cost of wind damage, which would more than triple the government's exposure under the National Flood Insurance Program (NFIP)," the coalition said in the letter, a copy of which was obtained by Reuters.

The group says expansion of NFIP will result in incentives to build in unsafe or environmentally fragile areas. It says the forecast of tripled exposure under a federal plan that included wind coverage was confirmed by the American Academy of Actuaries.

Others groups in the coalition include Defenders of Wildlife, Environmental Defense, Friends of the Earth, the National Wildlife Federation, Republicans for Environmental Protection, the Council for Citizens Against Government Waste, the Competitive Enterprise Institute, Freedom Works, Taxpayers for Common Sense and the Association of Bermuda Insurers and Reinsurers.

"Although our groups have differing priorities, we all agree that expanding the NFIP program to include wind damage insurance would overwhelm the (scheme)," said the group.