An interim report by the Department of Homeland Security (DHS) on whether insurers improperly shifted Hurricane Katrina wind damage losses to the government’s flood program is not conclusive.

Although the DHS report stated it has uncovered “no evidence” that insurers improperly shifted costs to the National Flood Insurance Program (NFIP), the DHS report also said that, “although nothing came to our attention during our limited review to indicate WYOs attributed wind damage to flooding, we cannot rule out the possibility that it occurred…”

“The results of the inspector general’s interim report can best be summed up as: ‘On the one hand this, on the other hand that, and in the final analysis, it depends,’” said PIA National Senior Vice President Patricia A. Borowski, in comments to the National Underwriter. The report presents findings it admits are inconclusive and contradictory, Borowski said, “causing PIA to question its value.”

Agency officials said they don’t believe a final by report by the inspector general will be issued until early 2008, so the report will have to serve as the basis on which Congress will have to act on legislation reforming the NFIP, which could come up as early as October. The legislation, H.R. 3121, was passed by the House Financial Services Committee. An amendment by Rep. Gene Taylor (D-Miss.) was attached adding wind coverage to the NFIP, which PIA opposes.

“We believe that it is best to place this interim report on a shelf, not act on it, and wait until a final report is completed,” said Borowski. “From our perspective, the focus of DHS should be on the accuracy of their declarations of the status of flood and the NFIP’s actions to trigger flood coverage under federal flood insurance policies—both actions which we support. Anything else is a matter for state courts.”

Congress Study Finds No Flood Insurance Finagling (National Underwriter 8/14/07)

August 21, 2007