May 13, 2008 / 5:25 PM / 11 years ago

UPDATE 1-U.S. Senate renews flood insurance program

(Adds comments from industry groups, background, byline)

By Kevin Drawbaugh

WASHINGTON, May 13 (Reuters) - The U.S. Senate voted on Tuesday to extend until 2013 a federal program that insures millions of homes against floods and to forgive $17 billion in debt the program built up during Hurricane Katrina.

In an issue of concern to major insurers such as Allstate Corp (ALL.N) and State Farm (SFITX.O), the Senate approved renewing the National Flood Insurance Program (NFIP) in a 92-6 vote. Last week, it rejected adding wind damage coverage to the program.

The House of Representatives last year also voted to extend the program, but added wind coverage, and refused to forgive the debt. Negotiators from both chambers must now work out those stark differences in a compromise bill to send to President George W. Bush for his signature.

Bush has threatened to veto the House bill. The insurance industry opposes adding wind coverage to the program.

“Including wind coverage in the NFIP would likely have serious long-term repercussions for the program, from which it might not be able to recover,” said Carl Parks, senior vice president for government affairs at the National Association of Mutual Insurance Companies, an industry group.

Insurers argue that a wind add-on would expose the flood program to higher risks, a view backed up by a report last week from congressional investigators.

Insurers also say adding wind coverage would crowd them out of a viable business. But some lawmakers complain that it has become difficult to get wind coverage in coastal areas.

After Hurricane Katrina slammed into the Gulf Coast in August 2005, some devastated Gulf Coast homeowners accused insurers of avoiding big payouts by blaming damages on water and not wind, pushing claims onto the federal flood program.

The 40-year-old flood program will expire on Sept. 30 unless Congress reauthorizes it, a deadline expected to propel negotiators for the Senate and House toward agreeing on a final version of a bill.

“We urge the House to work with the Senate to produce a bill that the Bush administration can sign into law,” said David Sampson, president of the Property Casualty Insurers Association of America, another industry group.

Congress created the NFIP in 1968 to provide insurance that private companies would not offer.

Administered by the Federal Emergency Management Agency, it provides coverage through more than 90 companies that sell policies and collect premiums on the government’s behalf for a fee. The premiums go to FEMA.

The Senate bill would raise the annual limit on NFIP premium rate increases to 15 percent from 10 percent. It would also push FEMA to make more progress on improving mapping of flood-risk areas and to adjust premium rates accordingly.

The legislation takes additional steps to bolster the NFIP’s shaky finances and tighten up the handling of flood insurance policies by mortgage lenders and insurance agents. (Additional reporting by Richard Cowan; Editing by Tim Dobbyn)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below