White House threatens to veto national wind insurance plan

By Ana Radelat
Clarion-Ledger Washington Bureau
September 27, 2007

WASHINGTON — A wind insurance plan proposed by 4th District Rep. Gene Taylor and championed by Democratic House leaders came under a White House veto threat Wednesday.

Taylor's proposal, embodied in a flood insurance reform bill the House plans to vote on today, would add wind coverage to the National Flood Insurance Program. That would allow homeowners who want to buy insurance against windstorm damage to purchase it with their flood policies.

But the Office of Management and Budget said shifting liabilities for windstorm damage from private insurers to the flood insurance program would be "fiscally irresponsible."

The federal government subsidizes flood insurance policies to offer homeowners in coastal and other flood-prone regions affordable insurance. Congress established the program in 1968.

But the OMB policy statement released Wednesday said adding wind coverage to flood insurance "would encourage individuals to task on risks that are inappropriate, putting themselves in harm's way because they would not have to bear the full costs of any subsequent damages."

It also said all taxpayers "would be subsidizing insurance rates for the benefit of people in those high-risk areas."

Taylor, a Democrat who lives on the Mississippi Gulf Coast, disagrees.

"They apparently didn't read the bill," he said of the OMB officials who recommended the veto.

Taylor said premiums collected from homeowners would pay all claims, without the need for taxpayer subsidies.

"At the end of the day, the homeowner will decide whether it's a good deal or not because he can choose whether to buy the policy," Taylor said.

Taylor proposed adding wind coverage to flood insurance after insurance companies denied Hurricane Katrina wind claims. Insurers maintained damage to coastal homes was caused by surging water, not winds.

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