WASHINGTON--Congressman Gene Taylor, D-Miss., has sent a letter to congressional colleagues blasting an insurance trade group for claiming that his legislation adding windstorm coverage to the federal flood insurance program would bankrupt it.

Rep. Taylor's message assailing a consultant's report released by the American Insurance Association follows a letter written to AIA last week by one of his staff accusing the group of using false assumptions and "cooking the books" to justify the report's conclusions.

In his "Dear Colleague" letter to fellow members of Congress, Rep. Taylor attacked claims in the report by Towers Perrin stating that his legislation, known as the Multiple Peril Insurance Act (HR 920), could lead to a deficit of as much as $200 billion.

"The report is another bad faith action by the insurance industry," he wrote, calling it "based on ridiculous assumptions, scenarios and conclusions that are expressly prohibited in the bill."

Rep. Taylor included copies of letters of support for the concept behind HR 920 from Allstate and Nationwide executives, as well as a letter he sent to AIA President Marc Racicot responding to the study.

In the letter to Mr. Racicot, Rep. Taylor again asserted that the study represented a "bad faith action" and questioned the theoretical numbers which the study used to reach its conclusions.

"It focuses on a hypothetical federal program that would sell wind-only insurance policies all over America, would set premiums 20 percent lower than the predicted risks, and would charge the same windstorm premiums for beachfront property in Florida as for low-risk properties 500 miles inland," Rep. Taylor wrote. "Each of those circumstances is expressly forbidden in HR 920."

Rep. Taylor asserted in his letter to Mr. Racicot that the program created by HR 920 would be open only to those communities that participate in the National Flood Insurance Program and that agree to floodplain management standards as well as new windstorm building standards established under the legislation.

He also noted the legislation requires premiums be risk-based and actuarially sound.

"Towers Perrin mysteriously assumes that the premiums would be set 20 percent less than the risk," Rep. Taylor wrote. "Frankly, I am surprised that you have so little confidence in the Bush administration that you believe it could run up a $200 billion deficit despite a congressional mandate to implement the program on an actuarially sound basis."

Rep. Taylor has a personal history related to the coverage in his bill. The measure was crafted following his clash with State Farm over a windstorm claim he filed after the destruction of a home he owned by Hurricane Katrina in 2007. A lawsuit he filed was settled this year.

The bill will be the subject of a hearing tomorrow.

Mr. Racicot responded to Rep. Taylor in a letter sent this afternoon, calling the congressman's response to the study "a spurious, hyperbolic response that did not focus on the facts or evidence relevant to the enormous policy question under review."

The "very uncertainty that characterizes many aspects of this report should give pause to those in Congress who seek to federalize windstorm insurance without fully understanding the costs or consequences of doing so," he wrote

Towers Perrin sent a letter with Mr. Racicot's defending its methodology and the assumptions under which the study was crafted. Patricia Guinn, managing director of the Tillinghast business of Towers Perrin, said assumption that an expanded NFIP could assume 100 percent of the wind risk market was not unreasonable.

"FEMA has indicated that over 20,000 communities, covering 98 percent of the U.S. population, have joined NFIP," she said in the letter. "Our assumption was therefore that most communities, and certainly those with any significant wind exposure, would join the expanded NFIP in order to make the NFIP insurance option available to their residents."

The study's contention that an implicit subsidy could arise in the program despite its language represents "the difference between the legislative intent and the practical realities of implementation," she argued.

Mr. Racicot wrote Rep. Taylor that rather than a "search for the best and most durable solution to the vexing issues before us, you and your staff have instead, and regrettably, responded with a vitriolic attack on the property-casualty insurance industry as a whole."

In addition to the AIA, Nationwide and Allstate, several other industry groups have expressed opinions, generally siding with AIA.

A letter to the leaders of the House Financial Services Subcommittee from AIA, National Association of Mutual Insurance Companies, Property Casualty Insurers Association of America, and the Financial Services Roundtable also expressed concern that the proposed expansion of the program would only add to the burden of an already indebted National Flood Insurance Program and questioned whether all-perils coverage would actually be offered at risk-based prices.