- The Washington Times - Tuesday, June 27, 2006

COX NEWS SERVICE

A bill to overhaul the federal flood-insurance program, which is drowning in debt, was overwhelmingly approved by the House yesterday.

The bill would raise premiums for some property owners and increase the program’s borrowing authority from the U.S. Treasury from $20.8 billion to $25 billion. It passed 416-4.

Until last year, the program was financially self-sufficient, with premiums providing funding for all claims, assisted by borrowing from the Treasury during years with abnormally high flood losses.

But it was overwhelmed when an estimated 225,000 claims, expected to reach nearly $24 billion, were filed after Hurricanes Katrina and Rita struck last summer.

“We are dealing with a public program,” said Rep. Barney Frank, Massachusetts Democrat. “This is a case of the federal government stepping in to meet a very important social need.”

The bill would phase out subsidized premiums on second homes and businesses and replace them with fair-market rates. About 25 percent of insured property owners pay artificially low rates because of subsidies affecting older buildings.

“If you can afford one of those [vacation] homes, you can afford the insurance,” said Rep. Michael G. Oxley, Ohio Republican.

In addition, the bill would expand the flood-insurance program by increasing coverage limits and creating more types of optional insurance, such for as basement repairs and business interruption.

David John, a senior research fellow at the Heritage Foundation who studies flood insurance, said those expansions will “likely result in more losses and more deficits in the future.” He said the reforms offered by the bill are not enough to make it self-supporting, much less to pay off its debts.

The Senate Banking, Housing and Urban Affairs Committee passed an alternative bill in March that does not include the increased coverage limit or the optional insurance.

Additionally, the Senate bill would phase out subsidies on second homes and businesses more rapidly than the House bill. It also would eliminate subsidies for properties that have flooded repeatedly.

The Senate bill would also forgive the program’s financial debt and create a reserve fund to be used in exceptionally disastrous years such as 2005.

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