The U.S. Senate voted 59-38 on April 15th to re-authorize the FEMA-administered National Flood Insurance Program (NFIP) through the end of May, after allowing the program to lapse for almost three weeks during a Congressional recess. President Obama signed the measure into law as part of a bill authorizing an emergency extension of unemployment benefits and COBRA health insurance for laid-off workers, reports SNL Insurance Weekly (" Obama Signs Retroactive Flood Insurance Extension," by R.J. Lehmann). The New Orleans Times-Picayune covers the sharp partisan debate surrounding the Senate vote on the re-authorization measure here (" National Flood Insurance Program temporarily extended," by Jonathan Tilove). With the short-term extension achieved, a House committee held hearings on April 21 to consider NFIP's underlying long-term problems — which include an $18 billion debt to the Treasury, widespread political opposition to the re-drawing of Flood Insurance Rate Maps, and, according to some witnesses, conflicts of interest within the private insurance companies tasked with writing insurance coverage and adjusting claims. Written statements of witnesses, along with a streaming video of the 2-hour hearings, are posted at the House Committee on Financial Services Subcommittee on Housing and Economic Opportunity (“ Legislative Proposals to Reform the National Flood Insurance Program”). Several Congressional representatives voiced complaints on behalf of constituents who had been newly placed into designated flood plains as part of the ongoing revision of floodplain maps conducted by the US Army Corps of Engineers and FEMA. California Representative Doris Matsui said 15,000 households in her Sacramento district face a new requirement to pay $1,250 a year for flood insurance, even though state and local governments are spending hundreds of millions of dollars on levee improvements designed to provide the area with a 200-year level of flood protection. FEMA's map revisions, Matsui said, did not take that levee improvement work into account. Louisiana Representative Steve Scalise focused on the performance — or non-performance — of the Flood Insurance Program for homeowners who actually carried insurance and were hit by Hurricane Katrina in 2005. "Many homeowners were forced to sue their insurance companies in order to recoup any money from their policies," said Scalise. "Some insurance companies over-billed the NFIP for flood damage, while denying homeowners on wind damage payments." House bill H.R. 1264, titled, " The Multiple Peril Insurance Act," co-sponsored by Congressman Scalise and Mississippi Congressman Gene Taylor, would add windstorm coverage to the flood insurance program. The idea is to combine coverage against wind and flood within a single policy, so insurers could not play one type of coverage off against the other to avoid paying out. At last week's hearings, Taylor slammed the insurance industry, charging that insurers used loopholes in coverage to drag their feet after Hurricane Katrina. Said Taylor ( view clip), "It wasn't just average Joes. It was the President of the United States Senate, Federal judges — if you can say one thing about the insurance companies after Katrina: they screwed everyone equally. But the sad part is that they screwed everyone." Taylor's bill, he said, would "prevent the horrible situation where tens of thousands of homeowners have to sue their insurance company to have a claim paid that should have been paid the day after the storm." Insurance coverage should cover storm losses, Taylor argued, not the American taxpayer — "but after Katrina," he said, "it was the American taxpayer that paid." Said Taylor, "We keep looking at what the flood insurance program lost. But because the private sector did not pay their fair share, the same season that the insurance industry had $44 billion in net profits [in 2005], our nation lost $53 billion to Katrina. We're trying to keep that from happening again." The present program is unsustainable, Taylor argued, because of a conflict of interest within the insurance industry. "We hire the private sector to sell the policy," he told the committee. "No problem there. But we hire the private sector to adjust the claim. After Katrina, agents from State Farm, Allstate, Nationwide, et cetera, walked into a piece of property where the house was gone, and had to make the decision, did the wind do it? Which means their company pays? Or did the water do it, which means the national flood insurance pays? Every time they walked on that piece of property, they said the water did it — the Federal Government's got to pay." Heavy hurricane seasons in 2004 and 2005, culminating with the disaster of Katrina, left the NFIP $18 billion in the red and scraping against its credit limit, as the program borrowed from the U.S. Treasury to cover claims. But adding new homeowners to the pool of insured people, testified FEMA administrator Craig Fugate, would not necessarily help the program become more solvent ( view clip). "The simple math would suggest, absent floods, we'll have more revenue coming in," Fugate explained. "The reality is, you're basing it on a one percent per annum risk, which means that these people are most likely to flood. And you're trying to make the program actuarially sound based on only the requirement that the policies be written at the highest risk. So you may see some short-term increase in funding, but the long-term exposure is actually greater. What the maps are doing in many cases is just more accurately depicting what that risk was. But that pool, even if it grows, does not offset the exposure — in fact the exposure increases."
