Nearly 5.6 million National Flood Insurance Program (NFIP) policies were in effect nationwide last year, but the program will expire on September 30, 2011, unless an agreement can be reached to extend it.  Homeowners on the Gulf Coast depend on the NFIP to make them whole if flooding from a hurricane destroys their property.  Last week, I introduced the Consumer Option for an Alternative System to Allocate Losses (COASTAL) Act, S. 1091, which would make needed reforms and reauthorize the NFIP for five years.

In addition to extending the NFIP, the COASTAL Act would use scientific data to settle total loss properties after a hurricane.  Following Hurricane Katrina, the wind versus water dilemma faced many homeowners who lost everything.  Insurance assessors had to determine how much of the damage was caused by wind or water.  The COASTAL Act helps resolve this issue, and answering it should further the effort to enact a multi-year NFIP reauthorization.

                    COASTAL Act Responds to Resident’s Needs 

Last year, I held a roundtable discussion with Mississippians on the Gulf Coast to discuss flood insurance reform.  Following that meeting, I began working with the National Oceanic and Atmospheric Administration (NOAA), FEMA, the Army Corps of Engineers, insurance experts, and Gulf Coast residents and business owners to develop a solution.  The COASTAL Act is the culmination of this effort.

One aspect of a hurricane—the flood damage—is covered by the NFIP, and the other aspect of a hurricane—the wind damage—is covered by insurance companies.  This causes difficulty in determining how to allocate the damage and make the policyholder whole again.  Often these disputes resulted in lengthy and costly litigation. 

In addition, Hurricane Katrina exposed the potential conflict of interest when private insurers adjusted claims for the government-administered NFIP.  Adjustors who worked for private insurers decided whether damage was caused by wind or water.  My legislation is designed to prevent this conflict.

The COASTAL Act utilizes data currently collected by NOAA, academic institutions, and private entities to allocate wind versus water damage following significant storms.  Using a post-storm event formula developed under this bill, damage would be determined by its source and attributed to wind or water peril.  The formula would be applied on a property-by-property basis so individual engineering characteristics of each home would be taken into account.  This would allow accurate insurance awards when no tangible evidence remains after a hurricane.

The alternative loss allocation system created under the COASTAL Act would be based on the timing, location, and magnitude of wind speeds and storm surges before, during, and after a major coastal storm.  An independent arbitration panel would examine administrative appeals that may be submitted by policyholders or insurers.

                    Busy Hurricane Season Points to Insurance Needs

Recently, NOAA predicted six to ten hurricanes could develop in the Atlantic this year.  With hurricane season beginning on June 1, now is the time to prepare.  One important part of that preparation should be checking flood insurance coverage.

People on the Gulf Coast know hurricane season comes each year, and we know all too well that many aspects of the insurance industry failed us after Katrina.  The COASTAL Act is an important first step in reforming the NFIP to achieve a broader, long-term reauthorization for this essential program.  We must put the NFIP on a sustainable path while addressing the unique exposures in coastal regions.

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