WASHINGTON–The House approved legislation designed to reform the insolvent National Flood Insurance Program yesterday after extended debate.

Approval for the bill came on a 416-4 vote.

The final product contains amendments of deep concern to the insurance industry, including one that mandates that the government investigate insurance company determinations of whether homes have a covered wind damage claim or an uncovered flood loss.

The American Insurance Association said after the vote that while it supported the underlying bill, it hopes certain amendments will be revisited before the bill is enacted. A major concern is a provision calling for an “investigation,” rather than a study, of the wind-vs.-flood issue.

Dennis Kelly, an AIA spokesman, also noted AIA concern about an amendment by Rep. Jo Ann Davis, R-Va., which would extend the proof-of-loss deadline. Another amendment contained a retroactive clause dealing with claims dating from 2003.

Mr. Kelly noted that the Senate has yet to put its bill on the floor, “and we expect there will be a conference to work out the differences between the House and Senate bills.”

A key difference between the House and Senate bills is that the House bill as passed Tuesday increases the NFIP borrowing authority to $25 billion.

The Senate bill forgives approximately $20 billion of the NFIP's debt, but imposes tougher standards for coverage going forward than does the House bill. The Senate bill was passed in May and is awaiting floor action.

The Independent Insurance Agents and Brokers of America praised the House bill, especially the provision increasing the program's borrowing authority.

The Property Casualty Insurers Association of America said it “hailed” passage of the House bill, noting that it contains many reform provisions proposed by the trade group and its members.

The House bill requires the owners of vacation homes to pay market rates for flood insurance coverage from the NFIP, ends subsidies for repetitive loss properties, and will update flood maps and require homeowners within the 100-year flood plain to have flood insurance.

The most controversial amendment for insurers was proposed by Rep. Gene Taylor, D-Miss. It charges the Government Accountability Office with “investigating” the wind/water issue in the wake of Hurricanes Katrina and Rita.

Rep. Taylor said that protecting citizens from floods is something the private market “wouldn't do or chooses not to do.” The report is due six months from enactment of the legislation.

In the wake of 2005's storm season, he said, the NFIP itself has drawn little criticism. “I've had very few complaints about the federal flood insurance program,” he said. “But, I've had tens of thousands of complaints from people about their wind coverage.”

Rep. Taylor's amendment received strong vocal support from Democrats, including Rep. Barney Frank.

And Rep. Mike Oxley, R-Ohio, chairman of the House Financial Services Committee and manager of the bill, added that Republicans think it is “appropriate” that the IG investigate the controversy.

Rep. Davis said her second amendment will extend the deadline for filing for proof of loss for up to 180 days following a disaster. It will also prohibit NFIP from denying claims solely for failing to meet the deadline and make this change retroactive to September 18, 2003, in order to provide much-needed relief for Hurricane Isabel victims.

In many cases, claimants were reportedly pressured to sign adjusters' proof of loss within 60 days of the flood even though they believed the adjusters had underestimated both the scope of damage and the associated costs of repair of their properties, she said.

For Republicans, the bill needed to be passed to make up for the government's obligations to Katrina victims.

“We have an obligation to these estimated 225,000 policyholders who have already filed a claim relating to the events of 2005,” Rep. Oxley said. “At the same time, we also have an obligation to reform and modernize the NFIP so that homeowners will have access to sensible flood insurance,” Rep. Oxley said.

A phase-out of subsidies for flood insurance for properties used as secondary homes or vacation homes also drew controversy. “If you can afford one of those homes, you can afford to pay your freight,” Rep. Oxley said.

This notion drew a challenge from fiscally conservative Republicans, who sought an immediate end to the subsidies rather than a gradual phase out.

“We have a duty to find savings wherever possible,” said Rep. Steve Pearce, R-N.M., who proposed the amendment.

Rep. Frank cautioned that an immediate end to the subsidies could cause a severe shock to some areas that are reliant on vacation homes and tourist income, as well as small businesses in those areas that would also be affected by the Pearce amendment.