WASHINGTON (Nov. 17, 2005)—House Financial Services Committee Chairman Michael G. Oxley, R-Ohio, and Ranking Member Barney Frank, D-Mass., introduced H.R. 4320, the National Flood Insurance Program Commitment to Policyholders and Reform Act of 2005, on Tuesday. On Wednesday, the Committee approved H. R. 4320 by voice vote.
The legislation would:
"The most critical element to NAMIC is the additional borrowing authority to pay claims arising from Hurricanes Katrina and Rita, as it is necessary to insure that all homeowners who purchased flood insurance are duly compensated,” said David A. Winston, NAMIC federal affairs senior vice president.
The National Flood Insurance Program claims liabilities arising from Hurricanes Katrina and Rita are estimated between $20 and $30 billion dollars, far surpassing the total claims paid in the entire history of the NFIP. On Sept. 20, 2005, the President signed into law the National Flood Insurance Enhanced Borrowing Authority Act of 2005 (PL 109-65), which authorized the NFIP to borrow up to $3.5 billion from the U.S. Treasury to pay claims. On Friday, FEMA Acting Director/Federal Insurance Administrator suspended funding under Letters of Credit, essentially telling Write Your Own Carriers to stop paying claims until the NFIP secures additional borrowing authority.
In a letter on Nov. 14, 2005, to House and Senate Ranking Members, NAMIC along with its coalition partners, urged Congress to immediately pass legislation that would increase the NFIP.
According to the NFIP, flood damage is reduced by nearly $1 billion a year through partnerships with the insurance industry, the lending industry and communities. Additionally, buildings constructed in compliance with NFIP building standards suffer approximately 80 percent less damage annually than those not built in compliance. And, every $3 paid in flood insurance claims saves $1 in disaster assistance programs.
In 1968, Congress created the National Flood Insurance Program (NFIP) in response to the rising cost of taxpayer funded disaster relief for flood victims and the increasing amount of damage caused by floods. Prior to that time, many homeowners were unable to insure against flood losses because private insurers did not offer such coverage. However, in recent years, there has been more awareness of the problem of providing continuing assistance to repetitive loss properties.
The NFIP was created as part of the National Flood Insurance Act of 1968 to enable the federal government to help cover the cost of flood damages. Prior to that time, insurance companies generally did not offer coverage for flood disasters because of the high risks involved. The legislation as amended in 1973 and 1994 authorizes the Federal Insurance Administration (FIA) and Mitigation Directorate to administer the NFIP as part of the Federal Emergency Management Agency.
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Posted: Thursday, November 17, 2005 12:00:00 AM. Modified: Friday, November 18, 2005 10:47:17 AM.
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