WASHINGTON (July 27, 2007) – The National Association of Mutual Insurance Companies (NAMIC) strongly urges Congress to pass what it called a "much-needed flood reform bill" but without a provision adding wind coverage to the nation’s flood insurance program. A bill adopted yesterday by the House Financial Services Committee and sent to the full House would revamp the National Flood Insurance Program.
“The NFIP is already in dire need of reforms, many of which are addressed in the legislation,” said Justin Roth, NAMIC’s senior federal affairs director. “But adding wind coverage to this program will only drive it further into debt, undoing any good that the rest of the legislation could achieve.”
The program is in a deficit due to the high cost of claims resulting from the 2005 hurricane season. The legislation, H.R. 3121, the Flood Insurance Reform and Modernization Act of 2007, would increase the NFIP’s borrowing authority to enable it to pay those claims.
The measure also provides funding for mitigation programs, mapping updates, and incentives to encourage more homeowners to secure flood insurance coverage.
In addition to these reforms, NAMIC also urged Congress to forgive the NFIP’s debt. “It’s imperative that Congress eliminate the debt that the NFIP has taken on as a result of the 2005 storms.” Roth said. He explained that as things stand now, the NFIP will use a large portion of its annual premiums in interest payments on the debt. “The last thing we want to do is leave this program in a constant state of flux,” he said. “It is important for policyholders to know that this program is on solid ground and will have the money to pay claims in the event of future flooding.”
But Roth said the effect on homeowners – and taxpayers in general – would be vastly different if Congress allows wind coverage to be included in the NFIP. “Adding windstorm coverage to the debt-ridden NFIP will only add to taxpayers’ liability,” Roth said. “It won’t make it easier for homeowners to collect coverage for wind-damaged homes.”
Roth said the private insurance market is the appropriate vehicle to provide windstorm coverage to homeowners. He suggested other measures would better address insurance concerns among homeowners in hurricane-prone regions. “Encouraging stronger building codes and mitigation efforts, updating the nation’s flood zone maps and ensuring that homeowners in flood zones have adequate flood insurance coverage, and allowing the private market to charge actuarially sound rates are key,” he said. “Those steps, along with an improved NFIP, will go a long way toward guaranteeing homeowners' structural and financial security following hurricanes.”
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Posted: Friday, July 27, 2007 12:00:00 AM. Modified: Friday, July 27, 2007 10:04:51 AM.
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