Flood Insurance Reform and Modernization Act of 2007--Motion to Proceed

Floor Speech

FLOOD INSURANCE REFORM AND MODERNIZATION ACT OF 2007--MOTION TO PROCEED -- (Senate - May 06, 2008)

BREAK IN TRANSCRIPT

Mr. WICKER. Madam President, this week the Senate will consider the reauthorization of the National Flood Insurance Program. Today, I have filed an amendment to this reauthorization legislation which is of critical need, not only to the gulf coast but to the entire country. My amendment would add a multiple peril insurance provision to create a new option in the National Flood Insurance Program of offering coverage of both wind and flood risk in one policy.

The proposal would require premiums for this new coverage to be risk-based and actuarially sound, so that the program would be required to pay for itself. Indeed, the Congressional Budget Office has estimated that the multiple peril program:

..... would increase premium receipts and additional claims payments by about the same amount--resulting in no significant net budgetary impact.

By covering wind and flood risk in one policy, the multiple peril option would allow coastal homeowners to buy insurance and know that hurricane damage would be covered regardless of whether that damage is caused by wind or water.

It has been just over 2 1/2 years since Hurricane Katrina hit the gulf coast with its 30-foot storm surge and winds over 125 miles an hour. Katrina was the most devastating natural disaster ever to hit North America.

The people of Mississippi and Louisiana have made great progress in rebuilding the communities along the gulf coast. Everyone knows the Federal Government's response was not perfect, but the Government and this Congress have done a lot to help to rebuild communities, homes, businesses, and lives along the gulf coast.

As much as the Government and this Congress have done, there is still more work to be done. There are still too many destroyed homes left uninhabited, too many slabs of concrete that represent all that is left of what used to be homes and businesses. A major contributing factor to this problem is the cost and availability of insurance. Since the day I became a Member of this body, the cost of insurance has become an issue I continually hear about. As I stated in my maiden speech, if you can't insure it, you can't build it or finance it. It is that simple. The problem is harming the efforts of small businesses to rebuild and grow and succeed, and it is driving rental rates beyond affordability. It is increasing the cost of home ownership and, in many cases, making it impossible for people who lost their homes to Katrina to rebuild.

Congress needs to act to find a workable solution to this problem, and the National Flood Insurance Program reauthorization gives us an opportunity to do so. I say this not only for the good of the people of Mississippi and Louisiana but also for every single American taxpayer and for every person who lives along the American coastline.

This is not just an issue for the gulf coast. From Bar Harbor, ME, to Brownsville, TX, millions of Americans live on a coastline in the path of future hurricanes. As the Biloxi Sun Herald noted this week in an editorial in support of my amendment:

More than half of the Nation's population lives within 50 miles of a coastline, and 50 miles is well within harm's way when a major storm makes landfall.

We have not always had a national flood insurance program. In 1968, Congress was forced to act to address the problems associated with flooding from hurricanes. Now the same problem that led to the National Flood Insurance Program is happening with wind. As it did in the past, Congress needs to act to address the problem. The National Flood Insurance Program was created because insurance companies quit offering coverage for flood damage caused by hurricanes. With competing wind and flood policies, the same has happened to wind insurance in these same areas.

Wind versus water--that is the debate which still occurs today in courtrooms on the Mississippi gulf coast between insurance companies and storm victims. It is a debate that necessitated the multibillion-dollar supplemental appropriations package this body approved after Katrina. Unless Congress changes the law, the wind versus water debate will result in a multibillion-dollar supplemental appropriations package after the next big hurricane wherever in the United States it may land. This is driving more and more homeowners and business owners into a State-sponsored wind pool, which is required to provide coverage. But this is not a reasonable long-term solution because too much risk is being placed in too small of a pool. What was initially conceived to be the last resort has now become the only resort for many Mississippians living along the gulf coast. The reality is that State wind pools, especially in my home State of Mississippi, are unable to spread the risk to balance the claims.

As the Government Accountability Office has pointed out, these competing wind and flood policies provide a conflict of interest in determining who is responsible to pay these claims. The flood insurance companies say it was wind. The wind insurance companies say just the opposite. Because of this, my constituents on the gulf coast are paying thousands of dollars to the State wind pool. That doesn't count flood insurance or homeowners insurance on top of that.

The picture I am painting here is quite clear: The unaffordability of insurance is driving people from their homes.

Some of my colleagues may point out that every homeowner can purchase wind insurance. I would argue that, as a practical matter, they cannot. As I mentioned before, this is not just a Mississippi problem, nor is it just a gulf coast problem. For instance, in Massachusetts, since 2003, 10 insurance companies have dropped homeowner coverage in the Cape Cod coastal area. This affects approximately 44,000 homeowners in Massachusetts. The Massachusetts State insurance backstop is now insuring 44 percent of the market.

I hope my colleagues from the following States, in addition to Mississippi and Louisiana and Massachusetts, will pay attention to this debate. States such as New York, Maryland, Virginia, South Carolina, Florida, Alabama, and Texas have all experienced the same problem. In North Carolina, for example, the State insurance plan known as the ``BEACH Plan'' saw its liability increase over 260 percent in just 4 years. I assure you, I would prefer that the private market write these policies, but this simply is not happening. Every day, more and more liability is being thrust upon the shoulders of the States.

To help address this problem, the best solution available is to allow homeowners to purchase wind and flood insurance coverage in the same policy. This would spread the risk outside of defined State borders and would ensure available, affordable, and total insurance for coastal homeowners. That is exactly what my multiple peril insurance amendment does.

Multiple peril insurance will allow property owners to buy both wind and flood coverage from the National Flood Insurance Program. Residential coverage would be $500,000 for structures and $150,000 for contents and the loss of use. For nonresidential, it would be $1 million for structures and $750,000 for contents and business interruption.

Under this amendment, property owners would be able to buy insurance and know in advance that hurricane damage would be covered without disputes over the cause of damage. No longer would home and business owners have to go to court to try to prove it was either wind or it was water that destroyed their property.

The premiums for this new single coverage would be risk-based and actuarially sound, according to the terms of my legislation. The CBO has agreed that the program will, over the long run, pay for itself.

Windstorm insurance would be available under my amendment only where local governments adopt and enforce the international building code or equivalent building standards. This Federal multiple peril program will spread risk geographically to form a stable insurance pool, compared to State pools that cover only a small area.

Again, I state this issue doesn't just impact the gulf coast. It impacts most directly the 55 percent of our country's population that lives within 50 miles of a hurricane-prone coastline.

Beyond that, however, this is a good-government issue that affects every single taxpayer. Multiple peril coverage would also protect the taxpayers by saving them from having to pay for another giant emergency relief package the next time a hurricane hits. It is not a question of if but when it happens and, I might add, where it happens again.

With the legislation before us, the reauthorization of the National Flood Insurance Program, we have been provided an opportunity to take action to begin to correct this inequality. I believe my multiple peril amendment is a good start.

I realize there are several philosophies about solving the coastal insurance crisis, and I am not wedded to any single approach. I would simply point out that this amendment has already been adopted by the House of Representatives in an amendment offered by my friend and former colleague, Representative Gene Taylor of Mississippi. What I am committed to is providing my constituents relief before the next hurricane hits. I do not believe Congress should take over the entire private market of all insurance. I believe in free market principles, and I believe Congress should look seriously at the State-by-State rate regulatory structure that forces insurers to set their rates on the basis of geographical boundaries within individual States in which they are admitted to do business. I believe Congress should consider other thoughtful proposals such as the one being advanced by the St. Paul Travelers Insurance Company, which would allow limited rate regulation relief for the purpose of creation of a coastal band. This is simply one of a number of good ideas that deserve consideration. But the status quo does not work, and that is what we have an opportunity to correct this week.

Some of my colleagues will argue against my amendment for a number of what they see as problems. Very seldom is legislation error-free or exactly correct at the outset, and my amendment is no different. We should not, however, let the perfect be the enemy of the good.

I ask my colleagues to remember all of the places along the coast of North America and perhaps invite them again to visit Hancock County, in my State of Mississippi, ground zero, where Katrina made landfall, and see for themselves why action is needed now and why we should not miss this opportunity on the reauthorization of the National Flood Insurance Program.

This amendment is badly needed. At the appropriate time during consideration of amendments, I will urge my colleagues to adopt the amendment.

Madam President, I yield the floor.

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