The bill won't call for reducing company or agent commissions. It also calls for greater increases in premiums and program tightening than the House bill, and will therefore theoretically increase industry revenues from the program.

The bill creates a mandatory reserve fund “to provide additional funding to help pay future claims without further need to seek contribution from the U.S. taxpayer,” Sen. Shelby said.

The insurance industry drafted a joint letter supporting the bill soon after the committee print was revealed to Sen. Shelby last Monday, and industry trade groups also issued separate statements Thursday voicing support.

During a March hearing, members of the Senate Banking Committee called into question industry commissions and implied the Senate bill might seek to cut them as a means of reducing the program's debt. However, the bipartisan bill unveiled last Monday backed off from that, calling only for a Government Accountability Office study of the issue.

According to NFIP officials, industry commissions range from 30 to 32 basis points (0.3-to-0.32 percent), and are determined annually. Of that, agents get 15 basis points, and 2 to 3 basis points are used to pay state premium taxes. Companies get the rest.

The Senate bill is different than the companion House bill because it will require more policyholders to pay fair-market rates and more homeowners to participate in the program than called for in the House bill.

The bill will also require more modern flood maps and increase penalties for lenders who violate its requirements.

The House bill was approved by the House Financial Services Committee on Mar. 16 and is awaiting floor action.

Known as the “Flood Insurance Reform and Modernization Act of 2006,” the Senate bill would require stricter compliance with mandatory insurance coverage and increased participation in the program.

The bill may run into opposition on the Senate floor from members in coastal states, such as Florida and North Carolina, because the cost to homeowners in coastal areas will be higher than for those in less-exposed jurisdictions.

The Shelby bill mirrors the House bill in that it will require policyholders with vacation homes to pay fair-market rates for their premiums. But the Senate bill toughens the House bill by ending subsidies for structures that have suffered severe repetitive losses due to flood claims, property that has incurred damage that exceeds its current fair market value, and any property that has sustained substantial damage exceeding 50 percent of its fair market value or improvements exceeding 30 percent of its fair market value.

In their joint letter, the trade groups voiced their “strong support” for the Shelby bill. “The devastation from Hurricanes Katrina, Rita and Wilma exposed weaknesses in the NFIP and the need for reforms to put it on a more stable financial footing,” the letter said.

The letter was signed by the American Insurance Association, the Independent Insurance Agents and Brokers of America, the National Association of Mutual Insurance Companies, the Property and Casualty Insurance Association of America, and the Professional Insurance Agents of America.