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South Mississippi Living 4/07

Thursday, October 18, 2007

Schumer Vows Push To Add Wind Coverage To Flood Insurance Program Overhaul Approved By Senate Banking Committee

Reports Estimate That One Million U.S. Homeowners in Northeast Have Had Homeowners' Insurance Policies Cancelled Since 2004

Plan To Cover Wind Damage Would Help Provide Affordable Insurance Policies for Coastal Residents—Proposal Has Already Passed House

October 17, 2007

WASHINGTON—Following the Senate Banking Committee’s passage today of a bill to update the federal flood insurance program, U.S. Senator Charles E. Schumer vowed to continue to push for the program to include wind damage. The provision—omitted in today’s unanimously approved legislation—would address the rising tendency of insurance companies to deny homeowner insurance policies on coastal areas in the aftermath of natural disasters like Hurricane Katrina.

Schumer said adding wind damage to the flood insurance program—as a House-passed measure would do—would offer protection to homeowners on coastal areas like Long Island, and keep insurance premiums there low. He noted how just this week, published reports estimated that since 2004, one million homeowners in the Northeastern United States have seen their policies cancelled.

“This bill takes important steps towards upgrading the flood insurance program, but covering wind damage is a logical, necessary next step,” Schumer said. “Winds from coastal storms can often inflict even greater damage than rising water, but private insurers are leaving homeowners high and dry.”

In recent years, at least half a dozen companies have either stopped writing policies on Long Island, or refused to renew existing policies, some of which were decades old. Allstate, MetLife, Travelers, Liberty Mutual and Nationwide are among the insurers who have begun to pull out of Long Island, citing overexposure and risk due to a potential hurricane strike. Despite a state law that prohibits companies from dropping more than 4% of policies in a year, some companies have found a way around the rule, convincing customers to move to other companies, or offering bonuses to agents who persuade “high-risk” customers to drop coverage. However, for those homeowners that are able to maintain coverage, the spiking premiums can be equally devastating.

To address the crisis, Schumer has proposed a series of updates to the nearly 40-year-old National Flood Insurance Program (NFIP), which is administered by FEMA. Schumer has said the Senate should consider increasing the maximum coverage level above the current limit of $250,000, which he said was “simply too low for areas with higher construction and rebuilding costs.” Significantly, Schumer also called for the NFIP to cover losses caused by wind, not just water. After Hurricane Katrina, many homeowners suffered uncovered losses when companies sought to classify the damage as caused by rising water, which is covered by the federal program, instead of by wind, which isn’t.

Both measures are contained in a bill that has already passed the U.S. House of Representatives.

Late this summer, at the start of the hurricane season, Senator Schumer called for a bipartisan Commission on National Catastrophe Risk Management and Insurance. The Commission would be comprised of 16 members with backgrounds in emergency management, engineering, financial markets, insurance, construction, meteorology, and policy ownership, and would be required to submit a report on their findings and recommendations to the Senate Banking Committee, of which Schumer is a member.


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