Congress Wades Into Flood Insurance Plan
Overwhelmed by claims from hurricanes Katrina, Rita and Wilma, Congress began plans last week to increase funding for the National Flood Insurance Program-for the third time in just two months.
The House Financial Services Committee overwhelmingly approved a bill that will increase funding for the program, the only national provider of flood insurance, to $22 billion.
The committee action came at the same time the full House was approving a temporary increase in funding to $8.5 billion-and just a month after it was increased to $3.5 billion, from $1.5 billion.
The increase in funding comes as the Federal Emergency Management Agency, which administers the flood insurance program, said it is rapidly running out of money to pay flood claims as it works to pay as many as 216,000 claims valued at more than $30 billion from the massive hurricanes.
But even as they were struggling to provide funding for the homes covered by the flood insurance program, lawmakers were still unsure about a much larger problem rendered by Hurricane Katrina-as many as 300,000 more properties valued at up to $50 billion that were not insured for flood damage.
CUNA lobbyist Gary Kohn said the credit union trade group supports the increase in flood insurance funding, and a separate proposal by Mississippi lawmakers that would allow uninsured property owners to buy into the NFIP retroactively.
"This not only affects our members, but members of credit unions as well, if they have been victims of a flood, if they're going to be able to repay their loans," said Kohn. Otherwise, he noted, credit unions could get stuck holding worthless loans.
Meantime, members of Congress were floating new proposals to deal with the uninsured, as the Mississippi lawmakers' bid has gained little support over the past few weeks.
Mississippi Sen. Thad Cochran introduced a new plan last week that would expand the Community Development Block Grant Program, which generally goes towards urban renewal projects, to award grants to uninsured property owners whose homes were destroyed by hurricane flooding.
Another proposal by Mississippi Gov. Haley Barbour would provide money appropriated but unspent for hurricane relief directly to governors of the three states most affected by Katrina-Mississippi, Louisiana and Alabama-and allow the states to apportion the funds to cover flood losses for home and business-owners.
Yet a third plan, introduced by Louisiana Congressman Richard Baker, was being debated last week and would have Congress establish a Louisiana Redevelopment Corp., which would be empowered to float tax-free revenue bonds raise funds to buy up and renovate billions of dollars in damaged property in and around New Orleans.
The bill to increase funding for the flood insurance program would also make several reforms to the program, including increasing coverage for residential properties (from $250,000 to $335,500); for inside furnishings (from $100,000 to $135,000); for businesses (from $500,000 to $670,700); and for living expenses (up to $1,000 for three months).
It would also increase fines for credit unions, banks and other lenders who do not enforce the mandatory requirement on lenders to purchase flood insurance for property in a flood plain from the current $350 per incident to $2,000.
And it would require FEMA to create an appeals process for disputes on insurance coverage.