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Diverse Coalition Calls on U.S. House-Senate Conference Committee to Pass NFIP Renewal Without Adding Wind Coverage, Reject Billions in New Taxpayer Liability

September 9, 2008

Americans for Smart Natural Catastrophe Policy (AFSNCP), a national coalition of environmental, consumer, taxpayer, free market and insurance organizations, yesterday delivered a letter to members of the House Financial Services Committee and Senate Banking Committee who will soon be meeting to make a final decision on reauthorizing the National Flood Insurance Program (NFIP). The letter calls on Members to reject the House provision adding wind damage to the flood insurance program and instead accept the Senate provision, providing for critical reforms and creating a Commission on Natural Catastrophe Risk Management and Insurance.

All of the coalition’s member organizations agree that the issue of natural catastrophe policy is too important and complex and deserves additional study before Congress takes further action. The Commission’s bipartisan membership should include experts in areas such as risk mitigation and prevention, climate change science, public finance, flood mapping, building standards, emergency management, environmental issues, insurance and reinsurance.

“Natural catastrophe policy requires a longer-term, more comprehensive approach than what is currently being proposed, particularly as we look for ways to protect the environment and keep people out of harm’s way as we confront more intense storms and hurricanes, and as sea levels continue to rise,” said David Conrad, Senior Water Resources Specialist at the National Wildlife Federation, a member organization of Americans for Smart Natural Catastrophe Policy.

“Federal wind insurance would create a terrible system of incentives. It would encourage people to build in harm's way. It would destroy America's coastlines,” said Eli Lehrer, Senior Fellow with the Competitive Enterprise Institute, another member organization of Americans for Smart Natural Catastrophe Policy. “We need to end all of the government's incentives for environmental destruction and, at the same time, help move people out of harm's way. The Senate bill makes sense. The House bill doesn't.”

AFSNCP strongly urges Members to reject the language adopted by the House of Representatives that would expand the NFIP to include wind damage insurance. The U.S. Senate voted 74-19 to reject such an amendment. Adding wind coverage would overwhelm an already overburdened program that has an $18 billion deficit and is struggling to resolve flood claims. Expanding the NFIP to include wind damage would also incentivize the building of homes and buildings in unsafe or environmentally-unsound areas and will end up costing American taxpayers billions of dollars. According to Towers Perrin, a global professional services firm that helps improve performance through people, risk and financial management, the potential cost to the federal government could be as much as $200 billion if wind coverage is added to the NFIP.

A recent study by former President Clinton appointee Robert Shapiro and American Enterprise Institute research fellow Aparna Mathur also estimates massive new taxpayer liabilities if wind damage were included in the NFIP program and the U.S. Gulf Coast suffered a hurricane season comparable to that of 2005. Taxpayers in 20 states would be hit particularly hard by multi-billion dollar burdens under the legislation, the study finds. These include $19 billion for Californians, $11 billion for New Yorkers, $7 billion for Illinoisans, $6 billion for Pennsylvanians and taxpayers in New Jersey, $5 billion for those in Ohio, $4 billion each for taxpayers in Massachusetts, Michigan and Virginia, and at least $3 billion for those in Connecticut, Indiana, Maryland, Minnesota, North Carolina and Washington.

Americans for Smart Natural Catastrophe Policy believes there is a better way. ASNCP cites H.R. 6424, the Property Mitigation Assistance Act, which was recently introduced by the Chairman of the U.S. House of Representatives Committee on Homeland Security, Representative Bennie Thompson (D-MS) as environmentally-responsible and fiscally-sound alternative to H.R. 3355, the Homeowners’ Defense Act, which would create a federal natural catastrophe backup fund and provide federal loans to states, and H.R. 3121, the Flood Insurance Reform and Modernization Act, which would add wind coverage to the NFIP. Chairman Thompson’s approach serves to promote public safety without creating a massive federal bailout program or financially overwhelming the National Flood Insurance Program.

About Americans for Smart Natural Catastrophe Policy
Americans for Smart Natural Catastrophe Policy is a national coalition made up of a diverse set of voices united to support environmentally-responsible and fiscally-sound approaches that promote public safety. The Coalition strongly opposes legislative proposals that encourage people to build homes in hurricane-prone, environmentally-sensitive areas by creating new programs that directly or indirectly subsidize their homeowner’s insurance.

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