NASHVILLE, Tenn.—Severe flooding that hit Nashville, Tenn., shows the pressing need to extend the National Flood Insurance Program and may be the catalyst to get a reluctant Congress to act, experts say.

According to the National Weather Service, 13.5 inches of rain fell on the Nashville area between May 1-2, causing the Cumberland River to flood much of Music City USA. Insurance industry and weather experts have categorized the event as a 500-year flood. However, it affected areas of Nashville and Davidson County that were never expected to flood.

The Property Claim Services unit of Insurance Services Office Inc. does not have an insured loss estimate, but has assigned the event a catastrophe serial number, which means estimated insured losses exceed $25 million.

Nashville Mayor Karl Dean estimated damages in the city alone could top $1 billion, while insurance industry experts said losses could top $1.5 billion. According to New York-based consultant Towers Watson & Co., a $1.5 billion loss would make the Nashville flood the seventh-largest nontropical convective storm event on record.

Of 25,082 in-force flood polices in Tennessee as of March 4, 100 were in Davidson County, which includes Nashville, according to the Federal Emergency Management Agency, which runs the NFIP.

However, the NFIP will expire May 31 if Congress doesn't extend it. The program has lapsed twice this year.

House Financial Services Committee Chairman Barney Frank, D-Mass., has proposed H.R. 5255, which would extend the NFIP temporarily. Additionally, the House Financial Services Committee has endorsed H.R. 5114, a comprehensive NFIP reform bill brought by Rep. Maxine Waters, D-Calif.

Rep. Frank's bill, the Stable Flood Insurance Authorization Act of 2010, would extend coverage through Sept. 30. Rep. Waters' bill, the Flood Insurance Reform Priorities Act of 2010, would extend coverage through Sept. 30, 2015.

The idea is to provide two options to the Senate, which has been reluctant to approve a long-term NFIP extension because lawmakers disagree on various changes. The options are a short-term solution to get through hurricane season and a long-term solution that backers say would provide stable rates, eliminate subsidies and increase limits for homeowners and businesses.

Outside of those two measures, a third bill—H.R. 4213—which focuses mostly on federal COBRA premium subsidies, also includes an NFIP extension through the end of the year.

The National Assn. of Mutual Insurance Cos., the Independent Insurance Agents & Brokers of America and Property Casualty Insurers Assn. of America back the measures proposed by Reps. Frank and Waters.

“I think (the Nashville) flood might definitely influence Congress to come up with ways to continue the NFIP, but I think they will just extend it for the short term,” said John DeMartini, Stamford, Conn.-based executive vp and catastrophe manager at Towers Watson.

With roughly 4,000 in-force NFIP policies at the time of the flood, many insurance industry experts speculated much of the loss may be uninsured.

“Outside of the Opryland area, which had extensive damage, claims are anywhere between $5,000 and $500,000,” said Rich Lafayette, Atlanta-based vp and managing director of Crawford & Co., an independent claims handler. Opryland contains the Opryland Hotel and Convention Center as well as the famed Grand Ole Opry House music theater.

NFIP coverage has a $250,000 limit for homeowners and a $500,000 limit for commercial businesses.

As for the flood insurance market, Mr. DeMartini said he expects coverage will be available to those who live in flood-prone areas.

“Under normal circumstances, insurers would retreat and become more aware of flood potential and reduce capacity,” Mr. DeMartini said. “But in a soft market, underwriters tend to have short memories. There might be an initial reaction to get a handle on their flood exposures, but I don't think (people) will have trouble finding coverage.”

Al Tobin, New York-based managing director for Aon Risk Services, said the need for NFIP could not be more important given this year's flooding in Nashville and New England. He also cited 2008 Midwest floods that affected Iowa and Missouri.

“If this program didn't exist during the flooding that took place in Cedar Rapids (Iowa) in 2008, the damage to the communities in that area would have been devastating,” Mr. Tobin said. “The extension of NFIP is a big concern, but Congress doesn't seem too excited to extend it on a long-term basis.”