Summary of H.R. 920, the Multiple Peril Insurance Act

From the Office of Rep. Gene Taylor

Cosponsors: Maxine Waters, D-CA; Bobby Jindal, R-LA; Charlie Melancon, D-LA; Walter Jones, Jr. R-NC; William Jefferson, D-LA; Jo Bonner, R-AL; Carolyn Maloney, D-NY; Emanuel Cleaver, D-MO; Al Green, D-TX; Wm. Lacy Clay, D-MO; Edward Markey, D-MA; Lincoln Davis, D-TN; Rodney Alexander, R-LA; Donna Christensen, D-VI; Bennie Thompson, D-MS; Henry Cuellar, D-TX; Danny Davis, D-IL; Neil Abercrombie, D-HI; Jeff Miller, R-FL; Timothy Bishop, D-NY; Sheila Jackson-Lee, D-TX; Alcee Hastings, D-FL; Carolyn C. Kilpatrick, D-MI; Donald Payne, D-NJ; Corrine Brown, D-FL; Loretta Sanchez, D-CA; Steve Cohen, D-TN.

H.R. 920, the Multiple Peril Insurance Act, would create a new program in the National Flood Insurance Program to enable the purchase of wind and flood risk in one policy.

The bill requires premiums for the new optional coverage to be risk-based and actuarially sound, so that the program would be required to collect enough in premiums to pay claims.

Multiple peril policies would be available where local governments agree to adopt and enforce building codes and standards designed to minimize wind damage, in addition to the existing flood program requirements for flood plain management.

Any community participating in the flood insurance program could opt into the multiple peril option, but the greatest demand for the product will be in coastal areas that face both flood and wind risk from hurricanes and tropical storms. Insurance companies are withdrawing from coastal areas and forcing state-sponsored insurers of last resort to take on much more disaster risk.

The Multiple Peril Insurance Act would allow homeowners to buy insurance and know that their damage from both wind and water will be covered. This is primarily a concern after a hurricane where the worst destruction is caused by a combination of wind and flooding. Homeowners would not have to hire lawyers, engineers, and adjusters to determine what damage was caused by wind and what was caused by flooding.

This bill would set residential policy limits at $500,000 for the structure and $150,000 for contents and loss of use. Nonresidential properties could be covered to $1,000,000 for structure and $750,000 for contents and business interruption.

Once the program is enacted, a private insurance market should develop to offer coverage above the limits. This would allow insurance companies to design policies that would have the equivalent of a $500,000 deductible for residential properties or a $1 million deductible for nonresidential properties.

Section by Section of H.R. 920,
the Multiple Peril Insurance Act

Section 1. Short Title

“Multiple Peril Insurance Act of 2007”

Section 2. Flood and Windstorm Multi-peril Coverage

Adds a new program to the National Flood Insurance Program to enable the
purchase of insurance covering losses resulting from flood and/or windstorm;

Multi-peril coverage is available only where the local government has adopted standards designed to reduce windstorm damages; (Flood standards already required by NFIP)

No duplicate coverage with multi-peril coverage and NFIP flood coverage;

Multi-peril policy covers damage from flooding and/or windstorm without requirement to distinguish flood damage from wind damage;

Premiums must be based on risks according to accepted actuarial principles;

The Director shall issue regulations setting the terms and conditions of coverage;

Aggregate policy limits are as follows:

Residential Structures - $500,000 for single-family dwelling; $500,000 per dwelling unit for structures with more than one unit; $150,000 per unit for combination of contents and increased living expenses for loss of use;

• Nonresidential Structures - $1,000,000 for structure; $750,000 for combination of contents and business interruption coverage.

Section 3. Prohibition Against Duplicate Coverage

Adds the prohibition against duplicate coverage to the existing flood program.

Section 4. Compliance with State and Local Law

No new coverage for any property that is in violation of local building and zoning
requirements designed to reduce windstorm damages.

Section 5. Criteria for Land Management and Use

The Director shall carry out studies to determine the appropriate standards for windstorm damage prevention, and establish criteria based on those standards.

Section 6. Definitions

Windstorm is defined as any hurricane, tornado, cyclone, typhoon, or other wind event.



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