House Financial Services Committee Chairman Barney Frank (D-Mass.) and committee member Rep. Ginny Brown-Waite (R-Fla.) have requested that the nonpartisan U.S. Government Accountability Office (GAO) conduct a study of the likely impact of adding optional windstorm coverage to the National Flood Insurance Program (NFIP).
Under the request, the GAO would have until April 2008 to analyze H.R. 3121, the Flood Insurance Reform and Modernization Act. Approved July 26 by the Financial Services Committee in a 38-29 vote, the bill includes provisions enabling the purchase of coverage for hurricanes, tornados, cyclones, typhoons and other wind events through the NFIP.
The letter asks the GAO to evaluate the NFIP’s ability to comply with the bill’s requirement that rates for windstorm coverage are actuarially sound; how rates could be determined; how the coverage would be sold; how claims would be adjusted; the likelihood that consumers would purchase the coverage; and whether the NFIP currently has the staff to implement the change. The members also ask for an analysis on how introduction of the coverage would affect capitalization of, and participation in, existing state wind pools.
The windstorm proposal, opposed by many Republicans, has also drawn fire from the American Insurance Association (AIA), the Property Casualty Insurers Association of America (PCI) and the National Association of Mutual Insurance Companies (NAMIC).
What It Means to Agents: PIA opposes the inclusion of multi-peril (wind) coverage in H.R. 3121. The approach is highly defective and will not resolve the fundamental problem. It just adds more cost for insurance coverage for consumers and increases the number of parties and coverage forms that could be drawn into a claims coverage controversy. PIA is working with the Senate to fix this problem aspect of the bill, because Members of Congress must vote for real solutions, not another set of empty promises.
Agents Say “No” or Nothing to Adding Wind to NFIP (Insurance Journal 8/6/07)
August 21, 2007