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WASHINGTON--An analysis prepared by Towers Perrin for the American Insurance Assn. holds that including windstorm coverage in the National Flood Insurance Program could increase the program's deficit by as much as $200 billion in a single year, the AIA said Wednesday.
Under the bipartisan Multiple Peril Insurance Act of 2007, introduced earlier this year in the House of Representatives by Rep. Gene Taylor, D-Miss., the NFIP would offer coverage for both wind and flood damage in a single policy. Nonresidential properties could be covered for up to $1 million for structure and $750,000 for contents and business interruption. Lower limits would be available on personal lines policies. The bill calls for risk-based premiums.
In a letter to Rep. Taylor, AIA President Marc Racicot said a Towers Perrin analysis of adding windstorm coverage to the existing NFIP produced "troubling" results.
"Towers Perrin concluded that incorporating windstorm insurance would significantly increase NFIP deficits under every scenario examined--in some scenarios, deficits from catastrophic wind events in a single year could be $100 (billion) to $200 billion, or potentially even higher," wrote Mr. Racicot.
"Although the property insurance market currently is under stress in several Atlantic and Gulf Coast states, the solution rests in improving, not displacing, private-sector ability to serve homeowners and businesses in the path of potential storms," Mr. Racicot wrote. "We oppose the creation of hurricane 'cat funds' and other government programs that ultimately result in a bail-out from taxpayers living in less-risky areas."
Rep. Taylor, whose district sustained significant damage from 2005's Hurricane Katrina, has been an outspoken critic of insurance industry claims-handling practices in the wake of the storm. During testimony before the House Financial Services Committee's Subcommittee on Oversight and Investigations earlier this year, Rep. Taylor accused insurers of committing fraud against policyholders, a charge that insurers denied.