White House Threatens To Veto Flood Insurance Reform Bill

255 words
26 September 2007
13:49
Dow Jones International News
English
(c) 2007 Dow Jones & Company, Inc.

WASHINGTON (Dow Jones) -- The White House is threatening to veto a proposed overhaul of federal flood insurance because it would expand coverage to include wind damage.

"Shifting liabilities for windstorm damage from the private sector to the (National Flood Insurance Program) would be fiscally irresponsible," the Office of Management and Budget said in a statement of administration policy. If the final bill includes the wind damage provision, President Bush's "senior advisors will recommend that he veto the bill."

Expanding the flood insurance program has been a priority for Gulf state lawmakers, many still dealing with the aftermath of Hurricanes Katrina and Rita.

But the White House and other opponents of the measure don't want to add another liability to the already cash-strapped government program. They say private insurance is available and that expanding the government program would encourage individuals to take on inappropriate risk.

"Expansion of the NFIP would also undermine economic incentives to mitigate risks because the program would likely distort rates from their market-determined values," the OMB said. "Finally, the inclusion of windstorm damage insurance in the NFIP would mean that all taxpayers would be subsidizing insurance rates for the benefit of those people in high-risk areas."

According to the White House, the flood program's total exposure is around $1 trillion and its potential debt burden is $20 billion.

-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256; henry.pulizzi@dowjones.com [ 26-09-07
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