[StBernard] Bush Advised To Veto Wind Liability; House Bill Would Expand Coverage

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Bush Advised To Veto Wind Liability; House Bill Would Expand Coverage
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Updates, Main AC RSS Feed, AC - Whats New BY: TIMES-PICAYUNE (NEW ORLEANS)
BY BRUCE ALPERT, WASHINGTON BUREAU

 

WASHINGTON -- President Bush's senior advisers will recommend that he veto
legislation, scheduled to be voted on today in the House of Representatives,
that would expand the National Flood Insurance Program to include coverage
for wind damage, according to a White House statement released Wednesday.

In a statement of administration policy, the Office of Management and Budget
said that "shifting liabilities for windstorm damage" from the private
sector to the federal flood insurance program "would be fiscally
irresponsible." It said the plan would have the effect of displacing
"insurance that is already provided by the private market" with a new
government program.




Louisiana lawmakers said the White House is ignoring the reality along the
Gulf Coast, where some insurance companies underpaid for wind damage during
Hurricanes Katrina and Rita. Those companies, they said, are either not
making insurance policies available or raising premiums and deductibles to
the point that recovery efforts are threatened.

"Today's policy position shows that the administration does not understand
the fight that residents of the Gulf Coast continue to have on a daily basis
with their insurance companies over whether the damage was done by wind or
water," said Rep. Bobby Jindal, R-Kenner.

Premiums, deductibles rise

Rep. William Jefferson, D-New Orleans, said that it's wrong to suggest, as
the Office of Management and Budget did, that Congress is seeking to
displace the private market when "the fact is the industry is abandoning"
Gulf Coast communities. State-sponsored insurers of last resort in Louisiana
and Mississippi are charging higher premiums than many people can afford, he
said.

The increases in rates are staggering, Rep. Charlie Melancon,
D-Napoleonville, said.

He said his Assumption Parish home lost a single shingle during the 2005
hurricanes, yet his premiums increased from $1,700 to $4,200, and his
deductible has risen from $1,000 to 5 percent, which could cost him $15,000
to $20,000 when the contents of his home are included.

Melancon said he and other members have asked what Congress might do to
induce private insurers to return to Gulf Coast markets but the response has
been "no response."

"We don't have an alternative," to the proposed expansion of the flood
insurance program to include wind damage, Melancon said.

Sen. Mary Landrieu, D-La., said that if the Bush administration won't accept
the current proposal before Congress, it has an obligation to come up with
another option.

"What solution is the White House willing to offer that provides necessary
coverage at a reasonable premium to homeowners and businesses from the
Pacific Coast to the Atlantic, the Great Lakes to the Gulf? Continuing to
blindly defend the status quo practices of the insurance industry is not an
answer," Landrieu said.

Risks called too high

In the statement of administration policy, the Office of Management and
Budget said the expansion proposed by House members, led by Rep. Maxine
Waters, D-Calif., would undermine economic incentives to mitigate risks.

"Individuals would be encouraged to take on risks that are inappropriate,
putting themselves in harm's way because they would not have to bear the
full costs of any subsequent damages," the statement 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."

Melancon said that the administration seems to ignore the experience
homeowners faced in Louisiana and Mississippi, where what seemed like more
than adequate private insurance still left homeowners with inadequate
payouts as the insurers attributed most damage to flooding, rather than
wind, no matter what evidence homeowners offered to the contrary.

At a House Rules Committee meeting Wednesday, the panel rejected a
Republican amendment that would delay the new wind damage insurance until
the federal flood insurance program pays off current debts, largely from
Katrina and Rita. That would have delayed implementation of the new program
for years, Democrats said.

To lower costs of the flood insurance program, Democrats said the bill calls
for a phasing out subsidized rates on commercial properties, vacation homes
and second homes built before 1974. Multifamily rental properties would be
excluded from the phase-out provisions.

. . . . . . .

Bruce Alpert can be reached at bruce.alpert at newhouse.com or (202) 383-7861.





Copyright 2007 The Times-Picayune Publishing Company