[StBernard] Flood-insurance program likely to stay afloat - Daily Comet

[Westley Annis]

Flood-insurance program likely to stay afloat - Daily Comet
Filed Under: Insurance NewsSep.25, 2010
The House voted Thursday to extend the National Flood Insurance Program for
a year, one day after the Senate did the same. Media reports say Obama is
expected to sign the bill before the flood-insurance program's Sept. 30
expiration.

Sen. David Vitter, R-La., lead author of the bill, said the program was
mired for months in politics, as members of Congress packaged its renewal in
bills that also temporarily extended unemployment benefits. As Republicans
and Democrats bickered over passing the bill in the face of a major federal
deficit, the program was allowed to lapse three times this year.

"This is a huge win for Louisiana," Vitter said in a statement. "For months,
I made the case that this issue was too important to too many people to be
used as a political football, and I know that the millions of homeowners who
have anxiously followed this legislation are breathing easier today."

About 4.5 million Americans depend on the program as insurance against flood
losses. Louisiana has 500,000 policy holders, ranking third behind Texas and
Florida.

While short lapses don't affect current policy holders, they prevent
prospective buyers from closing on new homes because banks and other
mortgage lenders require owners to have flood insurance.

Sen. Mary Landrieu, D-La., said that the ability of homeowners to buy and
sell homes without delay is fundamental to U.S. economy's recovery from a
severe recession. Uncertainty over flood insurance has wreaked havoc on an
already unstable real-estate market, she said.

"The National Flood Insurance Program is extremely important to all current
and future development in Terrebonne for the protection it provides us from
flooding," said Pat Gordon, Terrebonne's planning-and-zoning director.
"Everyone in Terrebonne Parish needs flood insurance, not just people in a
flood hazard area."

Gordon added that the importance of buying flood insurance is heightened now
because Terrebonne's new federal flood-risk maps, which may put many
homeowners in higher-risk flood zones, will be released in December.
Residents who expect their homes may be moved to a higher-risk zone can buy
flood insurance now and have their lower price locked-in before the flood
maps are in place, he said.

"Louisiana families and small businesses depend on the flood insurance
program for protection after disasters, and the one-year extension we passed
today will keep this critical safety net from expiring on Sept. 30," said
U.S. Rep. Charlie Melancon, D-Napoleonville. "But this short-term fix does
not replace the need to strengthen and reform the flood-insurance program."

In July, Melancon worked to pass a five-year extension, but the Senate
failed to act on the bill.

For years, critics have derided the program as a costly taxpayer subsidy
that encourages developers to build and people to live in coastal areas at
high risk of hurricanes and other places prone to flooding. The program
loses about $200 million a year, the U.S. General Accounting Office reported
in April, and owes the federal treasury $18 billion.

One reason for the massive debt is that political pressure to keep insurance
rates low has prevailed in Congress, and the program's revenue has failed to
cover the cost of paying claims for flood damage.

In a joint statement with Vitter and other coastal-state senators, Sen. Kay
Bailey Hutchison, R-Texas, said the one-year extension "gives Congress time
to get serious about modernizing the program while continuing to allow those
living in the floodplains access to flood insurance."