HR 3121 ignores basic problems with NFIP
On Sept. 27, the U.S. House of Representatives passed H.R. 3121, the Flood Insurance Reform and Modernization Act of 2007. On Oct. 17, the U.S. Senate Banking Committee voted unanimously to reform federal flood insurance, but refused to follow the lead of the House of Representatives and expand the program to cover wind damage.
In addition to expanding the program to cover wind damage, the House version of the legislation:
- Reauthorizes the National Flood Insurance Program (NFIP) for 5 years
- Alters flood mapping
- Bans insurers who offer NFIP policies from excluding wind coverage if wind and flood destroy a home at the same time
In State Farm’s view the Senate approach is preferable. It's essential to first complete reforms to the NFIP before expanding the program. According to the Towers-Perrin study commissioned by the American Insurance Association, if wind coverage is added to the NFIP, "program deficits from catastrophic wind events in a single year could be $100 to $200 billion."
Less than 20 percent of Mississippians whose homes suffered storm surge from Katrina had purchased flood coverage. State Farm is concerned that using the NFIP to provide wind coverage for coastal residents could lead to large numbers of homeowners without coverage.
State Farm supports NFIP reforms that:
- Address the balance between improving the NFIP and maintaining its affordability
- Ensure the availability and purchase of adequate coverage to protect property owners against flood damage
- Are based on actuarially sound rates