WASHINGTON -- The federal flood insurance program, still reeling from historic losses from Hurricane Katrina, may get help from Congress.
The House voted 416-4 yester day to phase out subsidies on some vacation homes and commercial property and raise premiums at a faster rate. The bill would also increase the amount of coverage a property owner can buy and boosts fines for mortgage lenders who don't tell customers they have to buy flood insurance.
The National Flood Insurance Program, a part of the Federal Emergency Management Agency, was established in 1968 to help homeowners, particularly those living in flood plains, obtain flood insurance that private insurers were unwilling to offer. Private insurers sell the government-subsidized policies. The program covers some 4.9 million policyholders in 21,000 communities that agree to take steps to reduce flood damage.
The program was self-supporting for its first 37 years, but last year it was jolted by claims from some 225,000 property owners for $22 billion arising from hurricanes Katrina, Rita, and others. Since those storms Congress has had to step in three times to raise the program's borrowing power, from $1.5 billion a year ago to $20.8 billion, so it could continue paying off claims. The House bill would raise the borrowing authority to $25 billion.
The House also accepted an amendment calling for a probe of Katrina damage claims, to see if insurers shifted the financial burden to the government by declaring that flooding, rather than wind, caused the destruction.
The maximum flood insurance coverage for residential property would be raised from $250,000 to $335,000, and coverage for contents per dwelling would go up from $100,000 to $135,000 under the bill. Currently, a homeowner living outside a flood plain with the maximum coverage and a $500 deductible pays about $1,100 annually. The premium for the same coverage inside a flood plain is about $2,000.