Measure mandating flood insurance stirs debate in Congress
Posted on Thursday, July 24, 2008
WASHINGTON — For thousands of Arkansans, earthen levees and concrete dams provide insurance from cresting rivers. The Senate version of a bill in the final lap around Capitol Hill says that’s not enough.
Both chambers of Congress have passed bills that would reauthorize the National Flood Insurance Program, a government-backed project that has been awash in debt since claims started piling up after Hurricane Katrina.
The Senate version stipulates that homeowners behind levees and dams would have to carry insurance that would cost, on average, $ 475 a year.
That’s “about the same thing as requiring insurance against a meteor falling on your house,” says Rep. Marion Berry, a Democrat whose Arkansas district runs along the Mississippi River.
Berry maintains that the Mississippi River and Tributaries levee system, a series of U. S. Army Corps of Engineers projects that protects a large part of the state’s eastern Delta, is enough.
“There’s no other levee system in the world that’s as well maintained,” he contends. MANDATORY PARTICIPATION Don Griffin, vice president of personal lines at the Property Casualty Insurers Association of America, says mandating participation will keep the program running and alert people to the risk of flooding.
“We as a country continue to develop areas susceptible to natural disasters,” he says.
“It’s time for those who live in those areas to fully appreciate and understand the costs of living there.” The legislation would reauthorize the flood-insurance program, which is to expire on Sept. 30. Congress set up the program in 1968, because private insurers considered flood insurance too risky.
Until the 2005 hurricane season, the system, which is administered by the Federal Emergency Management Agency, seemed to work well.
Private insurers provided coverage, with the federal government as a backstop.
Then came Katrina.
During 2005, after Hurricane Katrina’s devastation, 210, 204 victims filed flood claims, and the program paid out $ 17. 7 billion to rebuild or repair lost homes.
That’s more than the total program had reimbursed people for damages in its entire 40-year history, according to the Government Accountability Office.
The program owes the U. S. Treasury at least $ 17. 3 billion.
The Senate version of the legislation would forgive that debt and require higher deductibles for the insured.
The House version would extend coverage to wind damage. SUBSIDIES TO BE PHASED OUT Both the House and Senate bills would phase out subsidies for people living in homes built before the program mapped out national insurance rates.
While the Senate would require homeowners to buy insurance even if they are behind levees, the House version of the bill would require only a study of economic impact on homeowners and on the financial soundness of the program if people behind levees were required to buy in.
Earlier this month, Berry sent a letter to Sens. Chris Dodd of Connecticut, the chairman of the Senate Banking Committee, and Richard Shelby of Alabama, the committee’s ranking Republican, urging them to take out the requirement.
The letter was signed by a bipartisan group of 19 other House members, including Arkansas’ Democratic Rep. Mike Ross.
It’s unclear how many Arkansans would be required to purchase insurance if the Senate version becomes law.
Last year, 16, 924 Arkansans had the federal coverage. Fiftyeight claims, totaling $ 549, 000, were paid.
Currently, residents of areas in a 100-year flood zone who are not behind levees must buy federal coverage. During the course of a year, there is a 1 percent chance of flooding in a 100-year flood zone.
Johnny Kent’s house, located about one-half mile away from the White River in Batesville, has survived four major floods.
This year, it was flooded twice, peaking on March 20, when the water was more than seven feet high in his basement. The water destroyed his heating system and air conditioner. Along with other damages, his repair bills totaled $ 40, 000. ‘MOST AFFORDABLE THING’ Kent, who owns a tire dealership, pays $ 900 a year for flood insurance. Compared to the cost of cleaning up, “it’s the most affordable thing,” he says.
Jim Daniels’ house hasn’t been inundated, but there have been times when he’s put his couch up on bricks in fear of water rolling in.
Daniels, president of the First National Bank of McGehee, says that the additional monthly expense of flood insurance would make home ownership impossible for many of his potential customers, already hit by hard economic times.
“Everything’s tightening up,” he says. “Very few people are qualified,” for home loans. “If you throw flood insurance on top of that, it will be even more difficult.” Though the program expires at the end of the fiscal year, and House members have asked to begin conference negotiations with the Senate, Berry predicts the program will lapse, with the bill to be taken up again next year.
Gerald Galloway, a University of Maryland engineering professor who served as chairman of the Federal Interagency Levee Policy Review Committee, says he has the “greatest faith” in the levees along the Mississippi River.
But he warns that anything is possible.
“There’s a residual risk no matter how big your levee is.”
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