[House Report 111-551]
[From the U.S. Government Publishing Office]
111th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 111-551
======================================================================
MULTIPLE PERIL INSURANCE ACT OF 2009
_______
July 19, 2010.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 1264]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 1264) to amend the National Flood Insurance Act
of 1968 to provide for the national flood insurance program to
make available multiperil coverage for damage resulting from
windstorms or floods, and for other purposes, having considered
the same, report favorably thereon without amendment and
recommend that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Hearings......................................................... 3
Committee Consideration.......................................... 4
Committee Votes.................................................. 5
Committee Oversight Findings..................................... 5
Performance Goals and Objectives................................. 6
New Budget Authority, Entitlement Authority, and Tax Expenditures 6
Committee Cost Estimate.......................................... 6
Congressional Budget Office Estimate............................. 6
Federal Mandates Statement....................................... 7
Advisory Committee Statement..................................... 8
Constitutional Authority Statement............................... 8
Applicability to Legislative Branch.............................. 8
Earmark Identification........................................... 8
Section-by-Section Analysis of the Legislation................... 8
Changes in Existing Law Made by the Bill, as Reported............ 9
Dissenting Views................................................. 15
Purpose and Summary
H.R. 1264, the Multiple Peril Insurance Act of 2009, would
amend the National Flood Insurance Act to create a public
option for property owners to purchase flood and wind coverage
in one policy. Through the National Flood Insurance Program,
property owners will have access to a public option to buy
windstorm insurance and know that hurricane and tropical storm
losses will be covered without delays, disputes, and lawsuits
over what damage was caused by flooding and what damage was
caused by wind. The new public option would be available only
where local governments opt in and adopt International Building
Codes or the equivalent.
Background and Need for Legislation
In the aftermath of and in light of his personal
experiences following Hurricane Katrina, Representative Gene
Taylor of Mississippi originally introduced the Multiple Peril
Insurance Act in the 110th Congress as H.R. 920. The text of
the Multiple Peril Insurance Act passed the House on September
27, 2007 as part of larger flood insurance program reform
legislation, the Flood Insurance Reform and Modernization Act
of 2007 (H.R. 3121). Legislative text substantially similar to
the provisions of H.R. 920 was introduced in the Senate by
Senator Roger Wicker as an amendment to S. 2284, the Flood
Insurance Reform and Modernization Act of 2007. The amendment
failed by a vote of 19 to 74 during consideration of S. 2284.
Rep. Taylor reintroduced a substantially similar bill on March
3, 2009 as H.R. 1264. Both the Bush and Obama Administrations
have expressed opposition to the Multiple Peril Insurance Act
throughout its legislative history.\1\ Additional background
information regarding multiple peril determination issues is
available in two comprehensive reports prepared by the
Government Accountability Office.\2\
---------------------------------------------------------------------------
\1\For the Bush Administration's opposition, see, http://
www.whitehouse.gov/omb/legislative/sap/110-1/hr3121sap-r.pdf; for the
Obama Administration's opposition, see, http://www.reinsurance.org/
files/public/060209_review_1.pdf.
\2\For the two GAO reports, see, ``Natural Catastrophe Insurance:
Analysis of a Proposed Combined Federal Flood and Wind Insurance
Program'' at http://www.gao.gov/new.items/d08504.pdf; and ``National
Flood Insurance Program: Greater Transparency and Oversight of Wind and
Flood Damage Determinations Are Needed'' at http://www.gao.gov/
new.items/d0828.pdf.
---------------------------------------------------------------------------
By eliminating gaps in insurance coverage and eliminating
the delays and disputes over wind or flood damage, the new
public insurance option created by the Multiple Peril Insurance
Act is intended to reduce future disaster assistance costs
after hurricanes. After Hurricane Katrina, the federal
government spent more than $34 billion on rental assistance,
vouchers, trailers and other manufactured housing, grants to
homeowners, and Small Business Administration disaster loans to
homeowners. A portion of those costs may have been avoided were
a public option available to allow property owners to purchase
insurance that provided seamless coverage of hurricane losses
that would have paid claims promptly and in full.
The Multiple Peril Insurance Act is also intended to create
a more stable and efficient, public option for insurance in
coastal areas. The Multiple Peril Insurance Act is also
intended to reallocate resources and spread coastal wind and
flood risk geographically so that a small portion of policies
would be affected by a single event. Currently, the private
insurance marketplace forces each coastal state to operate its
own wind pool that would have to pay on a substantial
proportion of policies from a single event. None of the single-
state pools is capable of building up sufficient reserves to
cover a major hurricane making a direct hit on a large
population center. The public option created by the Multiple
Peril Insurance Act would free the states of these private
market forces and allocate risk and resources among multiple
states through a Federal umbrella. The bill requires premiums
for the new, public, optional coverage to be risk-based and
actuarially sound, so that the program would be required to
collect enough premiums to pay claims.
Multiple peril policies would be available where local
governments agree to adopt and enforce building codes and
standards designed and determined by FEMA to minimize wind
damage, in addition to the existing Federal flood program
requirements for flood plain management. Any community
participating in the public flood insurance program could opt
into the multiple peril, public insurance option, but the
greatest demand for the optional coverage product will be in
coastal areas that face both flood and wind risk from
hurricanes and tropical storms.
The Multiple Peril Insurance Act would allow homeowners to
buy insurance and know that their damage from both wind and
water will be covered. This is primarily a concern after a
hurricane where the worst destruction is typically caused by a
combination of wind and flooding. Homeowners would not have to
hire lawyers, engineers, and adjusters to determine what damage
was caused by wind and what was caused by flooding.
This bill would set residential policy limits at $500,000
for the structure and $150,000 for contents and loss of use.
Nonresidential properties could be covered to $1,000,000 for
structure and $750,000 for contents and business interruption.
Once the new optional coverage program is enacted, it is
hoped that, unlike what has happened after 40 years of the
National Flood Insurance Program, a private insurance market
would develop to offer coverage above the limits. This would
allow insurance companies to design policies that would have
the equivalent of a $500,000 deductible for residential
properties or a $1 million deductible for nonresidential
properties.
Hearings
The Subcommittee on Housing and Community Development held
a hearing entitled ``Legislative Proposals to Reform the
National Flood Insurance Program'' on April 21, 2010. At the
hearing, the following witnesses testified:
The Honorable Jerry Costello, Member of
Congress
The Honorable Doris Matsui, Member of
Congress
The Honorable Steve Scalise, Member of
Congress
The Honorable Gene Taylor, Member of
Congress
The Honorable Craig Fugate, Administrator,
Federal Emergency Management Administration
Ms. Orice Williams Brown, Director,
Financial Markets and Community Investment, U.S.
Government Accountability Office
Mr. David R. Conrad, Senior Water Resources
Specialist, National Wildlife Federation
Mr. Mark Davey, President and Chief
Executive Officer, Fidelity National Financial
Specialty Insurance Group, on behalf of the Write Your
Own Coalition
Mr. Larry Larson, Executive Director,
Association of State Flood Plain Managers
Mr. John Rollins, President, Rollins
Analytics, Inc.
Mr. Barry Rutenberg, Second Vice Chairman of
the Board, National Association of Homebuilders
Mr. Maurice ``Moe'' Veissi, Veissi &
Associates, First Vice President, National Association
of REALTORS
In the 110th Congress, the Subcommittee on Housing and
Community Opportunity held a legislative hearing entitled
``H.R. 920, the Multiple Peril Insurance Act of 2007'' on July
17, 2007. At the hearing, the following witnesses testified:
The Honorable Richard H. Baker, Member of
Congress
The Honorable Gene Taylor, Member of
Congress
The Honorable Charlie Melancon, Member of
Congress
The Honorable Bobby Jindal, Member of
Congress
Mr. David I. Maurstad, Assistant
Administrator for Mitigation, Federal Emergency
Management Agency
Ms. Pam Pogue, Vice Chair, Association of
State Floodplain Managers
Ms. Sandy Praeger, Commissioner, Kansas
Insurance Department, on behalf of the National
Association of Insurance Commissioners
Mr. Ted A. Majewski, Senior Vice President,
Harleysville Insurance, on behalf of the Property
Casualty Insurers, American Insurance Association, and
National Association of Mutual Insurance Companies
Ms. Cheryl Small, Policy Advisor, National
Flood Determination Association
Mr. Mark Cumbest, President, Cumbest Realty
Mr. W. Anderson Baker, III, CPCU, ARM,
Gillis, Ellis & Baker Inc
Dr. Robert P. Hartwig, Ph.D., CPCU,
President and Chief Economist, Insurance Information
Institute
Mr. David Conrad, Senior Water Resources
Specialist, National Wildlife Federation
Committee Consideration
The Committee on Financial Services met in open session on
April 27, 2010, and ordered H.R. 1264, Multiple Peril Insurance
Act of 2009, favorably reported to the House by a record vote
of 40 yeas and 25 nays.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Frank to report the bill to the House with a
favorable recommendation was agreed to by a record vote of 40
yeas and 25 nays (Record vote no. FC-116). The names of Members
voting for and against follow:
RECORD VOTE NO. FC-116
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ X .........
Mr. Kanjorski.................. X ........ ......... Mr. Castle....... ........ X .........
Ms. Waters..................... X ........ ......... Mr. King (NY).... ........ X .........
Mrs. Maloney................... X ........ ......... Mr. Royce........ ........ X .........
Mr. Gutierrez.................. ........ ........ ......... Mr. Lucas........ ........ X .........
Ms. Velazquez.................. X ........ ......... Mr. Paul......... ........ X .........
Mr. Watt....................... X ........ ......... Mr. Manzullo..... ........ X .........
Mr. Ackerman................... X ........ ......... Mr. Jones........ X ........ .........
Mr. Sherman.................... X ........ ......... Mrs. Biggert..... ........ X .........
Mr. Meeks...................... X ........ ......... Mr. Miller (CA).. ........ X .........
Mr. Moore (KS)................. X ........ ......... Mrs. Capito...... ........ X .........
Mr. Capuano.................... X ........ ......... Mr. Hensarling... ........ ........ .........
Mr. Hinojosa................... X ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Clay....................... X ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. X ........ ......... Mr. Gerlach...... ........ X .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... ........ X .........
Mr. Lynch...................... X ........ ......... Mr. Price (GA)... ........ ........ .........
Mr. Miller (NC)................ X ........ ......... Mr. McHenry...... ........ X .........
Mr. Scott...................... X ........ ......... Mr. Campbell..... ........ X .........
Mr. Green...................... X ........ ......... Mr. Putnam....... ........ X .........
Mr. Cleaver.................... X ........ ......... Mrs. Bachmann.... ........ X .........
Ms. Bean....................... X ........ ......... Mr. Marchant..... ........ X .........
Ms. Moore (WI)................. ........ ........ ......... Mr. McCotter..... ........ X .........
Mr. Hodes...................... ........ ........ ......... Mr. McCarthy..... ........ X .........
Mr. Ellison.................... X ........ ......... Mr. Posey........ ........ X .........
Mr. Klein...................... X ........ ......... Ms. Jenkins...... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Lee.......... ........ X .........
Mr. Perlmutter................. X ........ ......... Mr. Paulsen...... ........ X .........
Mr. Donnelly................... X ........ ......... Mr. Lance........ ........ X .........
Mr. Foster..................... X ........ .........
Mr. Carson..................... X ........ .........
Ms. Speier..................... X ........ .........
Mr. Childers................... X ........ .........
Mr. Minnick.................... X ........ .........
Mr. Adler...................... X ........ .........
Ms. Kilroy..................... X ........ .........
Mr. Driehaus................... X ........ .........
Ms. Kosmas..................... X ........ .........
Mr. Grayson.................... X ........ .........
Mr. Himes...................... X ........ .........
Mr. Peters..................... X ........ .........
Mr. Maffei..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
No amendments were offered or considered during the
Committee's consideration of the bill.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 1264 amends the National Flood Insurance Act to create
a public option for property owners to purchase flood and wind
coverage in one policy. Property owners will have access to a
public option to buy windstorm insurance and know that
hurricane and tropical storm losses will be covered without
delays, disputes, and law suits over what damage was caused by
flooding and what damage was caused by wind.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
July 19, 2010.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1264, the Multiple
Peril Insurance Act of 2009.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Daniel
Hoople.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 1264-Multiple Peril Insurance Act of 2009
H.R. 1264 would expand the National Flood Insurance Program
(NFIP) to offer coverage for wind damage to property owners
located in certain communities. Coverage would be offered at a
premium sufficient to cover the future expected cost of that
coverage. Enacting H.R. 1264 would affect direct spending;
therefore, pay-as-you-go procedures would apply to the
legislation. However, CBO estimates that enacting H.R. 1264
would have no significant impact on the federal budget for each
year and no net effect over the next 10 years.
H.R. 1264 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
The legislation would authorize the NFIP to sell two new
types of insurance policies to residential and nonresidential
properties owners--multiperil and windstorm. Multiperil
policies would cover property damage resulting from flood or
wind. Windstorm policies would cover property damage resulting
from wind only. Both lines of coverage would be available for
properties located in communities that have adopted wind
mitigation measures consistent with international building
codes. Windstorm coverage would only be available for
properties also insured by a separate NFIP flood policy. (While
properties covered by separate flood and windstorm policies
would be insured by the program for the same events as those
covered by a multiperil policy, the aggregate premium offered
to the property owner could differ due to existing subsidies
for some flood insurance policies.)
H.R. 1264 would direct the NFIP to charge actuarial (that
is, unsubsidized) premiums for new multiperil and windstorm
policies. The timing and magnitude of future claims payments
cannot be forecast with certainty because of the nature of
actuarial pricing and the uncertainty about when damages might
occur that would result in claims. The NFIP might collect
aggregate premiums that are above or below amounts necessary to
pay expenses in a given year (particularly if a major event
were to occur soon after enactment of the legislation) and over
time\1\ In years that the program collects more premiums than
necessary to meet ongoing costs, the NFIP would record a
surplus (recorded in the budget as a net reduction in direct
spending). In years of insufficient premium collection, the
program would draw upon its reserves or available borrowing
authority from the Treasury (recorded in the budget as an
increase in direct spending).\2\
---------------------------------------------------------------------------
\1\See Congressional Budget Office, The National Flood Insurance
Program: Factors Affecting Actuarial Soundness (November 2009).
\2\As of July 2010, the NFIP had $18.8 billion in outstanding debt
to the Treasury. Under current law, the program may borrow up to $20.7
billion. CBO estimates that remaining borrowing authority (about $2
billion) will be exhausted by the end of fiscal year 2013.
---------------------------------------------------------------------------
For this estimate, CBO assumes that actuarially based
premiums calculated by the NFIP would generate a sufficient
amount to cover future costs. As such, increased claims
payments made by the program would be roughly offset by
additional premiums, resulting in no net change to direct
spending.
The CBO staff contact for this estimate is Daniel Hoople.
The estimate was approved by Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 1264 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This Act may be cited as the ``Multiple Peril Insurance Act
of 2009''.
Sec. 2--Coverage for windstorms
This section would create a program within the NFIP that
would provide optional multiple peril coverage for physical
damage from floods or windstorms, or optional windstorm
coverage for physical damage from windstorms. Duplicative
multiple peril and flood insurance coverage is prohibited.
Windstorm coverage will only be provided to those structures
that already have flood insurance. Coverage shall be made
available only at chargeable risk premium rates that are
required in order to make such coverage available on an
actuarial basis for the type and class of properties covered.
The FEMA Director shall provide by regulation the general
terms and conditions of insurability applicable to properties
eligible for multiple peril and windstorm coverage. For
multiple peril policies, residential policy limits would be set
at $500,000 for the structure and $150,000 for contents and
loss of use. Nonresidential properties could be covered to
$1,000,000 for structure and $750,000 for contents and business
interruption. For separate windstorm policies, regulations will
provide that coverage shall not exceed the amount such that the
aggregate liability under flood insurance and windstorm
coverage does not exceed the coverage limit applicable to
multiple peril coverage. This section becomes effective six
months after enactment.
Sec. 3--Prohibition against duplicative coverage
This section provides that flood insurance may not be
provided to any structure if that structure is covered by
multiple peril insurance.
Sec. 4--Compliance with State and local law
This section provides that no new multiple peril coverage
shall be provided for any property that has been declared by a
State or local zoning authority to be in violation of State or
local laws, regulations, or ordinances, which are intended to
reduce damage caused by windstorms.
Sec. 5--Criteria for land management and use
This section directs FEMA to carry out studies to determine
appropriate measures in wind events as to wind hazard
prevention. FEMA is directed to encourage the adoption and
application of any measures identified.
Sec. 6--Definitions
Windstorms are defined as any hurricane, tornado, cyclone,
typhoon, or other wind event.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
NATIONAL FLOOD INSURANCE ACT OF 1968
TITLE XIII--NATIONAL FLOOD INSURANCE
SHORT TITLE
Sec. 1301. This title may be cited as the ``National Flood
Insurance Act of 1968''.
* * * * * * *
CHAPTER I--THE NATIONAL FLOOD INSURANCE PROGRAM
BASIC AUTHORITY
Sec. 1304. (a) * * *
* * * * * * *
(c) Multiperil Coverage for Damage From Flood or Windstorm
and Separate Coverage for Windstorm.--
(1) In general.--The national flood insurance program
established pursuant to subsection (a) shall enable the
purchase of the following coverages:
(A) Multiperil coverage.--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); and
(B) Separate windstorm coverage.--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 windstorm, subject to
the limitations in this subsection and section
1306(b).
(2) Community participation requirement.--Multiperil
coverage pursuant to paragraph (1)(A) and windstorm
coverage pursuant to paragraph (1)(B) 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) Relationship to flood insurance coverage.--
(A) Prohibition against duplicative
coverage.--Multiperil coverage pursuant to
paragraph (1)(A) 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.
(B) Requirement to maintain flood insurance
coverage.--Windstorm coverage pursuant to
paragraph (1)(B) may be provided only with
respect to a structure (and the personal
property related thereto) that is covered by
flood insurance coverage made available under
this title and only during the period that such
structure (and personal property) are so
covered.
(4) Nature of coverage.--
(A) Multiperil coverage.--Multiperil coverage
pursuant to paragraph (1)(A) shall--
(i) cover losses only from physical
damage resulting from flooding or
windstorm; and
(ii) 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.
(B) Separate windstorm coverage.--Windstorm
coverage pursuant to paragraph (1)(B) shall--
(i) cover losses only from physical
damage resulting from windstorm; and
(ii) provide for approval and payment
of claims under such coverage or under
the flood insurance coverage required
to be maintained under paragraph (3)(B)
upon a determination that such loss is
from windstorm or flooding,
respectively, but shall not require for
approval and payment of a claim that
the insured distinguish or identify the
specific cause of the loss, whether
windstorm or flooding.
(5) Actuarial rates.--Multiperil coverage pursuant to
paragraph (1)(A) and windstorm coverage pursuant to
paragraph (1)(B) 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 applicable to
properties eligible for multiperil coverage pursuant to
paragraph (1)(A) and such terms and conditions
applicable to properties eligible for windstorm
coverage pursuant to paragraph (1)(B), subject to the
provisions of this subsection, including--
(A) the types, classes, and locations of any
such properties which shall be eligible for
such coverages, 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 coverages;
(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.--
(A) Multiperil 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:
(i) 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--
(aa) any contents
related to such unit;
and
(bb) any necessary
increases in living
expenses incurred by
the insured when losses
from flooding or
windstorm make the
residence unfit to live
in.
(ii) Nonresidential properties.--In
the case of nonresidential properties
(including church properties)--
(I) $1,000,000 for any single
structure; and
(II) $750,000 for--
(aa) any contents
related to such
structure; and
(bb) 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.
(B) Separate windstorm coverage.--The
regulations issued pursuant to paragraph (6)
shall provide that windstorm coverage pursuant
to paragraph (1)(B) for a property shall not
exceed the amount such that the aggregate
liability under flood insurance coverage
required to be maintained under paragraph
(3)(B) for the property and such windstorm
coverage for the property does not exceed the
applicable coverage limit for the property set
forth in subparagraph (A) of this paragraph.
(8) Effective date.--This subsection shall take
effect on, and shall apply beginning on, the expiration
of the 6-month period that begins on the date of the
enactment of the Multiple Peril Insurance Act of 2009.
[(c)] (d) In carrying out the flood insurance program the
Director shall, to the maxmium extent practicable, encourage
and arrange for--
(1) * * *
* * * * * * *
PROHIBITION AGAINST DUPLICATIVE COVERAGE
Sec. 1314. 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)(1)(A).
* * * * * * *
PROPERTIES IN VIOLATION OF STATE AND LOCAL LAW
Sec. 1316. (a) Flood Protection Measures.--No new flood
insurance coverage shall be provided under this title for any
property which 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
discourage or otherwise restrict land development or occupancy
in flood-prone areas.
(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.
* * * * * * *
CHAPTER III--COORDINATION OF FLOOD INSURANCE WITH LAND-MANAGEMENT
PROGRAMS IN FLOOD-PRONE AREAS
* * * * * * *
CRITERIA FOR LAND MANAGEMENT AND USE
Sec. 1361. (a) * * *
* * * * * * *
(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) 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 measures identified pursuant to
paragraph (1) and the adoption and enforcement of such
measures.
* * * * * * *
CHAPTER IV--APPROPRIATIONS AND MISCELLANEOUS PROVISIONS
DEFINITIONS
Sec. 1370. (a) * * *
* * * * * * *
(14) the term ``servicer'' means the person responsible for
receiving any scheduled periodic payments from a borrower
pursuant to the terms of a loan, including amounts for taxes,
insurance premiums, and other charges with respect to the
property securing the loan, and making the payments of
principal and interest and such other payments with respect to
the amounts received from the borrower as may be required
pursuant to the terms of the loan; [and]
(15) the term ``substantially damaged structure'' means a
structure covered by a contract for flood insurance that has
incurred damage for which the cost of repair exceeds an amount
specified in any regulation promulgated by the Director, or by
a community ordinance, whichever is lower [.]; and
(16) the term ``windstorm'' means any hurricane, tornado,
cyclone, typhoon, or other wind event.
* * * * * * *
DISSENTING VIEWS
H.R. 1264, the Multiple Peril Insurance Act of 2009,
proposes to expand the federal government's role in the private
insurance market by creating a massive new program to offer
government-provided coverage backed by taxpayer dollars against
property losses from hurricanes that could shift enormous costs
onto American taxpayers. This unwarranted and ill-advised
legislation would amend the National Flood Insurance Act of
1968, which created the National Flood Insurance Program
(NFIP), by adding windstorm insurance to the scope of insurance
coverage offered by the federal government, obligating it to
pay potentially billions of dollars in property damage claims
resulting from windstorms in addition to flooding.
We strongly oppose the expansion of the National Flood
Insurance Program to include windstorm damage. Transferring
these liabilities from the private sector to the NFIP would be
fiscally irresponsible. Federal government insurance would
supplant insurance that is already provided by the private
market. Expansion of the NFIP would also undermine economic
incentives to mitigate risks because the program would likely
distort rates from their market-determined values. Individuals
would be encouraged to take on risks that are imprudent,
putting themselves in harm's way because they would not have to
bear the full costs of any subsequent damages. 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.
The NFIP currently owes the U.S. Treasury $18.75 billion,
the amount it has been forced to borrow from taxpayers to pay
claims and expenses in excess of premiums collected. Since
2006, the Government Accountability Office (GAO) has included
the NFIP on its list of ``high-risk'' federal government
programs in need of comprehensive reforms. By its own account,
the NFIP will likely never be able to repay its debt to
taxpayers. For this reason alone, H.R. 1264 is unworthy of
support.
It is our view that fundamental reform of the National
Flood Insurance Program should be the priority of this
Congress, including the removal of subsidies over time to
improve the long-term solvency of the program. In contrast,
H.R. 1264 would dramatically increase the scope of the NFIP at
a time when the program is essentially insolvent and remains
grossly underfunded.
During the recent debate on H.R. 5114, the Flood Insurance
Priorities Act of 2010, which passed the House on July 15th,
there was bipartisan consensus on the need for major reform of
the NFIP. As approved by the House, H.R. 5114 would phase out
several categories of subsidies, but many Republicans believed
the reforms did not go far enough to put the program on a solid
path to self-sufficiency. We reiterate that the chief objective
for this Congress should be achieving fundamental reform of the
current flood insurance program, rather than embarking on a
massive expansion by the federal government into the wind
insurance business.
We are convinced that H.R. 1264 represents a poor public
policy choice for America, even if the NFIP were able to pay
back its debt and function as a self-sustaining program. If
H.R. 1264 were enacted, for example, it could result in
significant adverse selection for the multiple-peril program.
Because wind is a standard component of most private
homeowners' insurance policies, the initial demand for
government-backed wind coverage would most likely be
concentrated in regions where the risk of windstorm damage is
the greatest. As a result, if there was another large hurricane
or storm that caused both flood and wind losses, the cost to
taxpayers would be enormous and the NFIP's debt would increase
exponentially.
Obama Administration officials have echoed these concerns.
Last year, Secretary of Homeland Security Janet Napolitano,
wrote to Chairman Frank stating the Administration's opposition
to the expansion of the NFIP contemplated by H.R. 1264:
The Administration strongly opposes the provision in
the House bill establishing insurance coverage for
multiple perils. The Administration objects to this
coverage for a number of reasons. Coverage is available
in the private sector and through state wind pools.
Property owners are served by the private market, which
provides catastrophic windstorm coverage without the
need for Federal aid. The Administration, opposes
extending the Federal Government's role and increasing
its liability for an insurance program that is readily
available in the private sector and through state
insurance plans . . . Wind coverage would greatly
increase the NFIP's exposure to catastrophic risks at a
time when the program has a growing debt and accrued
interest of over $19 billion . . .
More recently, in testimony before the Subcommittee on
Housing and Community Opportunity on April 21, 2010, the top
Administration official responsible for our nation's emergency
preparedness and management of major catastrophic events such
as floods and hurricanes reiterated the Administration's strong
opposition to H.R. 1264. In the words of Craig Fugate,
Administrator of the Federal Emergency Management Agency:
We are concerned that under a multi-peril Federal
program, the liability for multi-peril insurance, which
is currently absorbed by the private property insurance
market, would be transferred to the U.S. Treasury and,
ultimately, to the American taxpayer. Notwithstanding
the bill's language, a Federal program will face
pressures to set aside risk-based pricing and offer
subsidized government insurance. If it lowered
insurance prices below the actuarially-fair value, a
Federal program would encourage people to take on more
risk than if they faced the full expected costs of
damages. In addition to the riskier behavior, Federal
Government participation in the wind insurance market
would displace private markets, and mandate an unfair
cross-subsidy burden on taxpayers.
At that same hearing, a representative of the Association
of State Flood Plain Managers (ASFPM), the nationwide network
of state and local officials who manage activities in
floodplains to protect our communities against natural
disasters, also criticized H.R. 1264:
The ASFPM has testified in the past to voice its
strong opposition to proposals that would add the
unknown exposure of an optional wind and flood policy
to the NFIP. While intended to benefit the narrow strip
of properties subject to both hurricane storm surge and
wind damage, this proposed policy change could
conceivably result in coverage of a property in a flood
zone that was destroyed by winds elsewhere in the
nation. While it is true that many Americans live in
coastal counties, relatively few of those are subject
to both storm surge and wind damage, so this concept
would involve a major cross subsidy of a small group at
risk of both wind and flood damage by policy holders
throughout the nation.
While Congress should examine market-based initiatives to
encourage more competitive markets for private property
insurance in high-risk areas, it would be fiscally
irresponsible to force the NFIP to take on new risks for wind
insurance, as it could expose taxpayers to further losses and
add billions of dollars to the Federal budget deficit.
Accordingly, we join the Obama Administration in strongly
opposing H.R. 1264.
Erik Paulsen.
Randy Neugebauer.
Mike Castle.
Judy Biggert.
Spencer Bachus.
Jeb Hensarling.
Patrick T. McHenry.
Ron Paul.
Scott Garrett.
Donald A. Manzullo
Thaddeus G. McCotter.
Michele Bachmann.
Shelley Moore Capito.
Peter T. King.
John Campbell.