Rep. Taylor: Insurers Stick US With Storm Damage Bills They Should Pay
Jesse A. Hamilton, Washington bureau manager
April 22, 2010
The National Flood Insurance Program received some time in the spotlight of a congressional hearing at which the insurance industry was often skewered and the program itself was criticized as a financial failure.
The hearing of a subcommittee of the House Financial Services Committee examined several bills that would make significant changes to the federal program, including some modernization efforts supported by insurers and the potential addition of wind damage coverage to the NFIP -- an outcome strongly opposed by the industry.
Rep. Gene Taylor, R-Miss., who lost his home during Hurricane Katrina, is the champion of the wind effort. "Obviously, I've pointed out a need for reform," he told BestWire. "Our nation gets stuck with a heck of a lot of bills that the insurance industry should have paid."
But Mark Davey, president and chief executive officer of Fidelity National Financial Specialty Insurance Group, told BestWire that such an idea "would be catastrophic. The program is stifled by the load of flood alone," he said. He noted at least half of the U.S. population lives in coastal areas. "If the federal government thinks the NFIP is in the position to take on 55% of the population's wind coverage, I think they need to revisit the situation."
The industry generally agrees with Davey, who testified on behalf of Write Your Own insurers, though the industry has been registering support for another bill, drafted by subcommittee Chairwoman Maxine Waters, D-Calif., that would give the program a five-year extension, modernize flood mapping, push more sound building practices and increase coverage limits. Actuarially sound insurance rates would be phased in over a 10-year period, and mandatory insurance for those in the newly mapped flood areas -- estimated to add about 6% to the rolls of those who would be required to buy insurance -- would be delayed five years. Davey said the Waters bill would add "much needed stability."
A few lawmakers speaking for Taylor's bill said they favored its "comprehensive" protections in hurricane events. "The present situation isn't working and doesn't need repeating," Taylor said in his own testimony. He also criticized the program for allowing the insurers themselves to handle damage assessments, which he said "has conflict of interest built in."
Taylor spent much of his time trying to bolster his argument for the addition of optional wind damage coverage to the program.
But Rep. Shelley Moore Capito, R-W.Va, ranking Republican on the subcommittee, said "it could be a recipe for a fiscal disaster," noting the NFIP has already built more than $18 billion in debt. And Craig Fugate, administrator of the Federal Emergency Management Agency, testified that if wind were added, "I do have concerns of the long-term viability of the NFIP."
Fidelity National Group's insurers have current Best's Financial Strength Ratings of A- (Excellent).
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