Flood Insurance Reform and Modernization Act of 2007
Floor Speech
FLOOD INSURANCE REFORM AND MODERNIZATION ACT OF 2007 -- (Senate - May 07, 2008)
BREAK IN TRANSCRIPT
Mr. WICKER. Mr. President, in a few moments, I will call up amendment No. 4719. I have been asked to withhold on that until the distinguished chairman arrives. At this point, I will simply describe to the Members of the Senate what my amendment does. May I proceed on that, Mr. President?
The PRESIDING OFFICER. The Senator is recognized for that purpose.
Mr. WICKER. Mr. President, my amendment No. 4719 would add an amendment to the National Flood Insurance Reauthorization Program to provide for multiple peril insurance. It would create a new option under the National Flood Insurance Program to offer coverage of both wind and flood risk in one policy. It is an idea that certainly makes sense to most Americans, particularly those along the gulf coast who have suffered the ravages of Hurricane Katrina and are still doing so 2 1/2 years later.
The proposal requires that premiums for this new coverage be risk based and actuarially sound so that the program would be required to pay for itself.
The Congressional Budget Office has issued a statement about similar language that was included in the House legislation. I will come back to that in a moment or two.
CBO 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 will allow coastal homeowners to buy insurance and know that hurricane damage would be covered.
I am pleased to announce to my colleagues that the Wicker multiple peril insurance program amendment, which I will call up in a few moments, has the backing of the National Association of Realtors. They have endorsed my amendment to add multiple peril insurance to the flood authorization bill.
Now, when we are embarking on a major change to a program, there are concerns that are voiced and need to be discussed. A number of people have expressed fears that multiple peril insurance would cause the displacement of jobs from the property insurance marketplace. In fact, I would contest that allegation and state to my colleagues this: The program will not create a sales force for Federal insurance agents. Indeed, in coastal communities, local insurance does not write wind insurance today. Of course, the local agents do write the traditional fire, theft, and liability insurance, and they earn commissions for the Federal policy, as they do now with the National Flood Insurance Program coverage. They will be able to continue to do so under the Wicker amendment.
Others have expressed concern that wind storm coverage is widely available and Federal involvement is not necessary. I would say this to that assertion: There is a difference between being able to purchase wind insurance under a very expensive, limited State wind pool, which people are able to do, theoretically, and being able to purchase wind insurance and still be able to pay your mortgage because it is so expensive that the typical American family is not able to do so.
Indeed, wind premiums are increasing exponentially because the risk is contained in geographical boundaries of a given State. My amendment would correct that problem. Also, I think another myth with regard to multiple peril insurance is that it would dramatically increase the exposure of the National Flood Insurance Program and the Federal Government to catastrophic loss.
That is where I want to get back to fully quote the Congressional Budget Office in this regard. The explicit language of the Taylor amendment, adopted in the House of Representatives and adopted overwhelmingly in that body, on a bipartisan basis, provides that the premiums coming to the program will be actuarially sound and risk based. I don't think we can be any more explicit than that. If a Member of the Senate would like to come forward and make that a little clearer, I would be happy to have an amendment in that regard.
The House of Representatives said the premiums are based on risk, and they must be actuarially sound. Here is what the CBO had to say about the proposal as it was offered and adopted in the House of Representatives, which is virtually identical to the amendment I am offering today:
H.R. 3121 would direct FEMA to offer such multiple peril coverage at an actuarial, i.e., unsubsidized rate. Because of the uncertain nature of actuarial pricing, FEMA might collect more receipts than necessary to pay future claims, resulting in a net reduction in direct spending. It is also possible that FEMA might collect less premium income than would be necessary to cover future liabilities from multiple peril policies, which would likely result in the need for additional borrowing authority from the Treasury. In the latter case, the legislation would prohibit FEMA from entering into or renewing any multiple peril policy until such borrowing is repaid.
That is the one difference in my amendment and the House-passed amendment. But, specifically CBO goes on to say:
CBO expects that the new coverage offering under H.R. 3121 would increase premium receipts and additional claims payments by about the same amount, resulting in no significant net budgetary impact.
Mr. President, so we enter into a debate today on a commonsense proposal to allow the insurance consumer to know when he or she purchases hurricane insurance, there will not be a debate between wind and water in the courtroom, and the insurance customer, homeowner, property owner can purchase insurance with the knowledge that he or she is covered regardless of the nature of the peril and pay a premium that is adequate to purchase such coverage.
AMENDMENT NO. 4719 TO AMENDMENT NO. 4707
Mr. President, at this point, I think it is appropriate--and I am told the chairman has no objection--to call up my amendment No. 4719, which is at the desk. I do so now.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Mississippi [Mr. WICKER] proposes an amendment numbered 4719 to Amendment No. 4707.
Mr. WICKER. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To provide for the optional purchase of insurance against loss resulting from physical damage to or loss of real property or personal property related thereto located in the United States arising from any flood or windstorm)
At the end, insert the following:
SEC. __XX. MULTIPERIL COVERAGE FOR FLOOD AND WINDSTORM.
(a) In General.--Section 1304 of the National Flood Insurance Act of 1968 (42 U.S.C. 4011) is amended--
(1) by redesignating subsection (c) as subsection (d); and
(2) by inserting after subsection (b) the following new subsection:
``(c) Multiperil Coverage for Damage From Flood or Windstorm.--
``(1) IN GENERAL.--Subject to paragraph (8), the national flood insurance program established pursuant to subsection (a) shall enable the purchase of optional insurance against loss resulting from physical damage to or loss of real property or personal property related thereto located in the United States arising from any flood or windstorm, subject to the limitations in this subsection and section 1306(b).
``(2) COMMUNITY PARTICIPATION REQUIREMENT.--Multiperil coverage pursuant to this subsection may not be provided in any area (or subdivision thereof) unless an appropriate public body shall have adopted adequate mitigation measures (with effective enforcement provisions) which the Director finds are consistent with the criteria for construction described in the International Code Council building codes relating to wind mitigation.
``(3) PROHIBITION AGAINST DUPLICATIVE COVERAGE.--Multiperil coverage pursuant to this subsection may not be provided with respect to any structure (or the personal property related thereto) for any period during which such structure is covered, at any time, by flood insurance coverage made available under this title.
``(4) NATURE OF COVERAGE.--Multiperil coverage pursuant to this subsection shall--
``(A) cover losses only from physical damage resulting from flooding or windstorm; and
``(B) provide for approval and payment of claims under such coverage upon proof that such loss must have resulted from either windstorm or flooding, but shall not require for approval and payment of a claim that the specific cause of the loss, whether windstorm or flooding, be distinguished or identified.
``(5) ACTUARIAL RATES.--Multiperil coverage pursuant to this subsection shall be made available for purchase for a property only at chargeable risk premium rates that, based on consideration of the risks involved and accepted actuarial principles, and including operating costs and allowance and administrative expenses, are required in order to make such coverage available on an actuarial basis for the type and class of properties covered.
``(6) TERMS OF COVERAGE.--The Director shall, after consultation with persons and entities referred to in section 1306(a), provide by regulation for the general terms and conditions of insurability which shall be applicable to properties eligible for multiperil coverage under this subsection, subject to the provisions of this subsection, including--
``(A) the types, classes, and locations of any such properties which shall be eligible for such coverage, which shall include residential and nonresidential properties;
``(B) subject to paragraph (7), the nature and limits of loss or damage in any areas (or subdivisions thereof) which may be covered by such coverage;
``(C) the classification, limitation, and rejection of any risks which may be advisable;
``(D) appropriate minimum premiums;
``(E) appropriate loss deductibles; and
``(F) any other terms and conditions relating to insurance coverage or exclusion that may be necessary to carry out this subsection.
``(7) LIMITATIONS ON AMOUNT OF COVERAGE.--The regulations issued pursuant to paragraph (6) shall provide that the aggregate liability under multiperil coverage made available under this subsection shall not exceed the lesser of the replacement cost for covered losses or the following amounts, as applicable:
``(A) RESIDENTIAL STRUCTURES.--In the case of residential properties, which shall include structures containing multiple dwelling units that are made available for occupancy by rental (notwithstanding any treatment or classification of such properties for purposes of section 1306(b))--
``(i) for any single-family dwelling, $500,000;
``(ii) for any structure containing more than one dwelling unit, $500,000 for each separate dwelling unit in the structure, which limit, in the case of such a structure containing multiple dwelling units that are made available for occupancy by rental, shall be applied so as to enable any insured or applicant for insurance to receive coverage for the structure up to a total amount that is equal to the product of the total number of such rental dwelling units in such property and the maximum coverage limit per dwelling unit specified in this clause; and
``(iii) $150,000 per dwelling unit for--
``(I) any contents related to such unit; and
``(II) any necessary increases in living expenses incurred by the insured when losses from flooding or windstorm make the residence unfit to live in.
``(B) NONRESIDENTIAL PROPERTIES.--In the case of nonresidential properties (including church properties)--
``(i) $1,000,000 for any single structure; and
``(ii) $750,000 for--
``(I) any contents related to such structure; and
``(II) in the case of any nonresidential property that is a business property, any losses resulting from any partial or total interruption of the insured's business caused by damage to, or loss of, such property from flooding or windstorm, except that for purposes of such coverage, losses shall be determined based on the profits the covered business would have earned, based on previous financial records, had the flood or windstorm not occurred.
``(8) EFFECTIVE DATE.--This subsection shall take effect on, and shall apply beginning on, June 30, 2008.''.
(b) Prohibition Against Duplicative Coverage.--Chapter 1 of The National Flood Insurance Act of 1968 is amended by adding at the end the following:
"PROHIBITION AGAINST DUPLICATIVE COVERAGE
"Sec. 1325. Flood insurance under this title may not be provided with respect to any structure (or the personal property related thereto) for any period during which such structure is covered, at any time, by multiperil insurance coverage made available pursuant to section 1304(c).''.
(c) Compliance With State and Local Law.--Section 1316 of the National Flood Insurance Act of 1968 (42 U.S.C. 4023) is amended--
(1) by inserting ``(a) Flood Protection Measures.--'' before ``No new''; and
(2) by adding at the end the following new subsection:
"(b) Windstorm Protection Measures.--No new multiperil coverage shall be provided under section 1304(c) for any property that the Director finds has been declared by a duly constituted State or local zoning authority, or other authorized public body to be in violation of State or local laws, regulations, or ordinances, which are intended to reduce damage caused by windstorms.''.
(d) Criteria for Land Management and Use.--Section 1361 of the National Flood Insurance Act of 1968 (42 U.S.C. 4102) is amended by adding at the end the following new subsection:
"(d) Windstorms.--
"(1) STUDIES AND INVESTIGATIONS.--The Director shall carry out studies and investigations under this section to determine appropriate measures in wind events as to wind hazard prevention, and may enter into contracts, agreements, and other appropriate arrangements to carry out such activities. Such studies and investigations shall include laws, regulations, and ordinance relating to the orderly development and use of areas subject to damage from windstorm risks, and zoning building codes, building permits, and subdivision and other building restrictions for such areas.
"(2) CRITERIA.--On the basis of the studies and investigations pursuant to paragraph (1) and such other information as may be appropriate, the Direct shall establish comprehensive criteria designed to encourage, where necessary, the adoption of adequate State and local measures which, to the maximum extent feasible, will assist in reducing damage caused by windstorms, discourage density and intensity or range of use increases in locations subject to windstorm damage, and enforce restrictions on the alteration of wetlands coastal dunes and vegetation and other natural features that are known to prevent or reduce such damage.
"(3) COORDINATION WITH STATE AND LOCAL GOVERNMENTS.--The Director shall work closely with and provide any necessary technical assistance to State, interstate, and local governmental agencies, to encourage the application of criteria established under paragraph (2) and the adoption and enforcement of measures referred to in such paragraph.''.
(e) Definitions.--Section 1370 of the National Flood Insurance Act of 1968 (42 U.S.C. 4121) is amended--
(1) in paragraph (14), by striking ``and'' at the end;
(2) in paragraph (15) by striking the period at the end and inserting ``; and''; and
(3) by adding at the end the following new paragraph:
"(16) the term `windstorm' means any hurricane, tornado, cyclone, typhoon, or other wind event.''.
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