WASHINGTON (BestWire) - The National Flood Insurance Program would begin offering optional "multiperil" commercial and residential policies that covered both wind and flood losses, under legislation reintroduced by Rep. Gene Taylor, D-Miss.

A Hurricane Katrina victim who later sued carrier State Farm for denying his homeowners insurance claim as an excluded flood loss, Taylor said he was reintroducing his Multiple Peril Insurance Act because "the insurance industry no longer wants to cover people for wind damage in coastal America or will not provide that coverage at a cost that is reasonable."

"Throughout coastal America, property insurance companies have dramatically increased premiums on existing policies, cancelled existing policies or have stopped writing new policies altogether for our nation's home and business owners," Taylor said in a statement. "It will also stimulate the economy throughout coastal America, particularly here in the Katrina area of the nation."

The measure would create residential policies offering coverage of up to $500,000 for the structure and $150,000 for contents and loss of use, and nonresidential policies with up to $1 million in coverage for the structure and $750,000 for contents and business interruption. The bill calls for rates to be set in accordance with actuarial principles and would require participating communities to adopt International Building Code standards.

Taylor's legislation has drawn a sharp rebuke from the property/casualty insurance industry, just as it did when bundled with a five-year NFIP extension that passed the U.S. House in 2007. Kathy Mitchell, federal affairs director with the National Association of Mutual Insurance Companies, suggested "adding another covered peril will double its exposure and future liabilities - further driving the program into the red."

Ordinarily just $1.5 billion, the NFIP's borrowing authority was raised to $20.75 billion in March 2006, with the program borrowing more than $17.5 billion in the wake of 2005's record hurricane season.

David A. Sampson, president and chief executive officer of the Property Casualty Insurers Association of America, also claimed there was little need for the measure, as "99% of all coastal properties in the United States" already have coverage either through private insurance or state residual markets.

Sampson noted Florida and Louisiana each offer coverage through a Citizens Property Insurance Corp.; Alabama, Mississippi, North Carolina, South Carolina, and Texas, have "programs designed specifically to provide windstorm coverage"; and so-called "Fair Plans" exist in California, Connecticut, Delaware, Georgia, Hawaii, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Oregon, Rhode Island, Texas, Virginia, and Washington.

Late last month, the U.S. House has passed legislation extending the NFIP for six months with no changes in its structure, as part of a $410 billion omnibus appropriations bill that will fund the federal government through the remainder of Fiscal Year 2009 (BestWire, Feb. 26, 2009).

The short-term extension for the NFIP likely pushes debate over the program's long-term future - including whether it should begin offering a "multiperil" policy - to this summer. Other changes proposed in the 110th Congress would have phased out some premium subsidies, raised the NFIP's maximum coverage limits for the first time since 1994 and introduced coverage of additional living expenses, business interruption, and finished basements.

Established in 1968 by the National Flood Insurance Act, the NFIP has more than 5.2 million commercial and residential flood insurance policies in force in more than 20,000 participating communities. More than 95% of the policies are sold and serviced through Write Your Own insurers, which are paid by the Federal Emergency Management Agency for marketing the policies and processing claims.

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