WASHINGTON – July 27, 2007 – A Democratic bill in the U.S. House – HR 920, The Multiple Peril Insurance Act of 2007 – has the potential to dramatically change the Florida property insurance market by offering windstorm coverage through the national flood insurance program. It passed its first House committee yesterday and has strong support from House Speaker Nancy Pelosi (D-Calif.), but not all lawmakers favor the change.
The House Financial Services Committee voted 38-29 in favor of the bill, which differs from other disaster insurance efforts that proposed coverage for all events, including earthquakes and tornadoes. HR 920 adds only windstorm coverage and proposes to do so through the existing National Flood Insurance Program (NFIP).
Pelosi may be HR 920’s leading asset as she wields her political strength to advocate passage. Pelosi pledged to help Gulf states impacted by Hurricane Katrina and sees this bill as a way to do that. She notes that 50 percent of U.S. homeowners can be considered coastal residents.
The bill still has an uphill fight to passage, however. A vote before the full House could come in September but it must then go to the Senate and, after that, to Pres. George Bush. While the issue has some bipartisan support, Republicans tend to oppose it while Democrats generally support it.
Even if HR 920 does make it through all the political hurdles, U.S. Rep. Ron Klein (D-Boca Raton) says it won’t end Florida’s property insurance woes. “This could provide some relief for some people, but I still think we need to take additional steps to reduce insurance costs,” Klein says.
The bill would allow NFIP customers to also buy windstorm insurance, presumably at lower rates since the risk from a hurricane would be spread among all coastal residents who also buy the coverage. However, windstorm would not be a stand-alone coverage and must be purchased in tandem with flood insurance. Pelosi says that would help curtail the type of leading wrangling that occurred after Hurricane Katrina as private insurers refused claims, saying the damage came from flooding rather than windstorm damage.
Even some Florida Democrats aren’t sure they support HR 920, preferring instead the more expansive disaster insurance. State Sen. Steven Geller (D-Hallandale) leans that way but says, “If we get wind in, that’s a plus. In Florida, that’s what we’re concerned about.” Florida Insurance Commissioner Kevin McCarty and Rep. Tim Mahoney (D-Palm Beach Gardens) also push for a national catastrophe plan modeled after Florida’s Hurricane Catastrophe Fund.
“We’re backing a bill that deals with bringing down the cost of insurance and provides more choice in insurance carriers,” Klein says.
Any kind of regional or national catastrophe program would ease the burden for Citizens Property Insurance, Florida’s state-run insurer, which as the state’s largest insurer of homes and condos covers much of the windstorm risk in South Florida.
If HR 920 did make it into law, it would change the dynamics of Citizens Property Insurance Corp., the state insurer of last resort. Homeowners with flood insurance could get windstorm protection through the NFIP. That would allow private insurers to offer homeowners policies that cover other disasters, a move that could open the market to greater competition.
House Financial Services Committee Chairman Barney Frank, D-Mass., backs the bill, saying it would pay for itself.
However, Rep. Spencer Bachus (R-Alabama) says that the NFIP program already runs in the red and had to borrow $18 billion following Hurricanes Katrina and Rita. He says he’s “not ready to support shifting the burden of wind damage to a plan that is nearly $18 billion in the red.”
Source: Miami Herald, July 27, 2007, Maria Recio.
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