Flood Insurance Bill Passes U.S. Senate

The U.S. Senate passed the Flood Insurance Reform and Modernization (FIRM) Act last month by a vote of 92 to 6. The FIRM Act, introduced by Chairman Christopher Dodd (D-Conn.) and Ranking Member Sen. Richard Shelby (R-Ala.), would help modernize and reform the National Flood Insurance Program (NFIP). It would also reauthorize the program through 2013, and contains a provision that forgives the Federal Emergency Management Agency’s (FEMA) $20 billion debt to the U.S. Treasury.

A different version of the FIRM Act passed in the U.S. House of Representatives last year and now the Senate and House must resolve the differences between the two versions before sending the FIRM Act to the President for his signature. The FIRM Act is considered a “must” item in Congress this summer since the NFIP is set to expire on Sept. 31. However, now that both the House and Senate have passed versions of the FIRM Act, it is more likely that the program will be reauthorized for an additional five years before it expires.

In addition to the five-year program extension, the Senate-passed FIRM Act has a number of policy reforms which the Big “I” strongly supports. Chief among them is a provision that would forgive the debt that the NFIP incurred as a result of the devastating 2005 hurricane season. Right now the program is almost $20 billion in debt from that season, and the forgiveness of this debt is crucial to the future financial security of the program. Additionally, the FIRM Act includes a provision that would remove the subsidies for second homes, which will help put the program on a path toward actuarial soundness.

A number of amendments were debated during the Senate’s consideration of the bill. The most controversial amendment, offered by Sen. Roger Wicker (R-Miss.), would have added windstorm coverage to the NFIP. This amendment was strongly opposed by insurance companies, environmental groups and consumer groups, and was defeated by a vote of 19-73. Unfortunately, an amendment that would have increased the maximum coverage limits for the program for the first time since 1992 was also defeated.

The Senate-passed FIRM Act also includes a provision that would create a Commission on Natural Catastrophe Risk Management and Insurance, a bipartisan group that would examine natural disaster risks and report back to Congress with recommended solutions. As the conduit between consumers and insurance companies, the Big “I” has long advocated that Congress develop a national solution to this national problem and sees the commission created by this legislation as a critical first step toward that goal.

The House and Senate must now resolve the differences between the two versions of the FIRM Act before the legislation can be sent to the President. During these negotiations, the Big “I” is hopeful that Congress will seriously consider including needed modernizations to the program in the final bill. Provisions to increase the maximum coverage limits and to include optional coverages such as business interruption coverage and additional living expenses are especially important to independent agents. An increase in coverage limits would enable consumers to better insure against losses due to flooding while the inclusion of additional living expenses and business interruption would help consumers who are hurt by flooding to overcome the uncertainty often experienced immediately after these events.

With the 2008 hurricane season beginning this month, the Big “I” will be lobbying the House and Senate aggressively to quickly resolve their differences in enacting a final FIRM Act into law. Millions of consumers are dependent on this government program for protection from the damage associated with flooding, and the long-term viability of the NFIP is dependent upon both the reform and reauthorization of this critical program.

John Prible (john.prible@iiaba.net) is Big “I” assistant vice president of federal government affairs.


House Passes Farm Bill

Last month, the House passed the2008 Farm Bill Extension Conference Report. The Senate was expected to pass it at press time. The Farm Bill would provide for the continuation of agricultural programs through fiscal year 2012. Though the Big “I” expressed significant concerns about unprecedented cuts to the Federal Crop Insurance Program (FCIP) throughout the consideration of the 2008 Farm Bill, the association believes this final Conference Report is a carefully balanced compromise of policy priorities that has broad support among organizations representing the nation’s agriculture, conservation and nutrition interests. The Big “I” joined with 557 other organizations in sending a letter to all Members of Congress urging them to support the 2008 Farm Bill.

The 2008 Farm Bill Conference Report contains a 2.3 point cut to the Administrative and Operating (A&O) reimbursement for the FCIP, a cut that represents more than $800 million lost to the program. While wanting to maintain the current funding, the Big “I” understands why Congress incorporated this cut in order to protect the integrity of the program in the future, and as part of the effort to get a final Farm Bill passed by both chambers.

Also present in the 2008 Farm Bill Conference Report are critical reforms to the program that would benefit both America’s farmers and the insurance agents that serve them. Chief among these reforms is a repeal of the legislation authorizing Premium Reduction Plans (PRP) and a tightening of anti-rebating language. Both PRPs and widespread rebating threaten the integrity of the program.

—J.P.