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Institute for Crisis, Disaster, and Risk Management Crisis and Emergency Management Newsletter Website |
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October
2008
Volume
15
- Number 1 |
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Personal Perspective by Katy Quinn Efforts to Cover Wind
Damage are Diverted by Crisis in the Financial Markets; Should the federal government should
cover wind damage under a national insurance program? Congress is concluding legislative business as I write. During these final days, both chambers have considered and passed legislation to extend supplemental funding for current disasters as well as reauthorize funding for the National Flood Insurance Program (NFIP). What wasn't included, however, was an extension of the program to include optional wind coverage, something that Representative Barney Frank has been pushing since assuming chairmanship of the House Finance Committee. Rep. Frank and Senator Chris Dodd – the key negotiators of a bill that would reauthorize the NFIP for five years, overhaul the program, and extend coverage to include wind – had not come to a consensus on the bill before the financial crisis hit. As Chairman of the House Finance Committee and Senate Banking Committees respectively, they were forced to put aside work on the bill to craft the $700 billion recovery package. As a result, attempts to negotiate wind coverage were sidelined and priority was given to what was absolutely necessary – a straight NFIP reauthorization and a supplemental including $22.9 billion in emergency disaster relief. The reauthorization of the NFIP, which was set to expire on September 30th, extended authorization for the program through March 9, 2009. Thus, future action to overhaul the NFIP or include wind coverage is not likely to occur before next spring. Next year, when Congress reexamines the NFIP, it will have to reconsider whether or not the federal government should cover wind damage under a national insurance program. Lawmakers are under pressure from constituents to provide federal assistance to those affected by this year's hurricanes and to continue funding for reconstruction from past events like Katrina. Premiums for insurance have increased sharply in hurricane ravaged areas and wind coverage through private insurance is often unavailable or unaffordable. Lawmakers argue that coverage would protect more people in the path of disasters and more money would be brought in from additional premiums. But this may prove to be a contentious
issue, as insurers
believe the private market adequately covers wind damage and oppose
adding
coverage because it could drive them out of the market. Also, some
Members of
Congress oppose wind coverage, as they believe it could increase the
government's exposure to liability and overburden the Treasury. Since
2005, the
sheer cost of expenditures from NFIP coverage of Katrina and other
disasters
has put considerable strain on the financing power of the government.
The
program is now $17.5 billion in debt. If
another bad hurricane season were to hit the In Congress, problems between the chambers and debt forgiveness are major stopping points. The largest impediment to progress is based in the House rules. Those rules require any legislation to be offset or paid for. The Senate version would provide debt forgiveness for the almost $18 billion debt, something Sen. Dodd has said is essential, but the bill does not offset the cost. On the other hand, the House version does not include debt forgiveness. During attempts to pass the Senate bill, an amendment to include wind coverage was defeated by a wide margin. Thus, even if Congress were not distracted by the financial crisis it seems that roadblocks to optional wind coverage would remain. Unless Dodd gives up the precondition of debt forgiveness, insurance companies let go of their lobbyists, or House drops "pay-as-you-go," progress is unlikely to be made next year. In light of these poor prospects it would behoove supportive lawmakers to back less controversial provisions such as Senator Mary Landrieu's proposal to increase oversight of insurance companies as they determine whether storm damage is caused by wind. US Senate backs flood insurance program extension http://www.reuters.com/article/marketsNews/idUSN2730050620080927 Gale Force Foolishness; Congress pushes for a federal windstorm insurance program http://www.weeklystandard.com/Content/Public/Articles/000/000/015/603tzvem.asp Flood Insurance Program Extension on Way to Bush |