WASHINGTON–The Bush administration flatly opposes expanding the National Flood Insurance Program to include windstorm coverage, a Treasury official told a House subcommittee today, placing a major roadblock in the path of legislation to expand the program.

Assistant Secretary for Economic Policy Phillip Swagel said in testimony before the House Financial Services Subcommittee on Housing and Community Opportunity that “the administration opposes H.R. 920.”

The hearing was held to gain the views of congressmen, state insurance commissioners, industry groups and consumers concerning the Multiple Peril Insurance Act of 2007.

The bill was introduced earlier this year by Rep. Gene Taylor, D-Miss., a vocal critic of the insurance industry for its actions in the wake of the 2005 Hurricane season.

Those who find fault with the program have suggested that private insurers who administer the flood program for the government have frequently managed to attribute home damage to flooding rather than windstorm activity, which they insure for.

Treasury's views were supported by Ted Majewski, senior vice president of Pennsylvania-based Harleysville Insurance Group, representing three major trade groups, but rejected by a representative of the National Association of Insurance Commissioners.

Kansas Insurance Commissioner Sandy Praeger, who is also president-elect of the NAIC, testified that private insurance appears to be paying less and less of the losses created by major storms.

At the same time, Robert P. Hartwig, president and chief economist for the Insurance Information Institute, offered similar arguments to those of the administration and the insurers.

But he also pointed out that H.R. 920 will not necessarily solve any of the problems facing the market today.

The take-up rate for flood coverage has historically been “woefully low” and is unlikely to rise as a result of the bill, he argued.

In his testimony, Mr. Swagel said that a federal insurance program for wind damage will displace the active private market and “could give rise to a large new burden on federal taxpayers.”

“The administration supports leaving wind coverage to the well-developed private market for such insurance and not creating a federal program for wind losses.”

In his testimony, Mr. Majewski told the panel that risk-based pricing would be swept away in the tide of inclusion in the NFIP.

He spoke for the majority of the industry, the American Insurance Association, the Property Casualty Insurers Association of America and National Association of Mutual Insurance Companies.

Mr. Majewski said policyholders most likely to purchase the expanded coverage would be those in the high-risk areas, which he said would create an “adverse selection” and limit the program's ability to spread its wind risk.

He also pointed out that the NFIP is already facing considerable deficits as a result of the 2005 storm season, while the private market has paid out significantly more in claims.

Ms. Praeger contended, however, that there is a “growing discrepancy” between total losses and insured losses after a major catastrophe.

“This discrepancy is exacerbated by a lack of all-perils coverage,” she said. As an example, Ms. Praeger said that while the private market did indeed pay out $40 billion in the wake of Hurricane Katrina, “private insurance covered only one third of the total economic response, with taxpayers covering the remaining seventy percent.”

“Providing consumers with all-perils coverage would unify these disparate approaches under one policy, shifting the burden off the consumer,” she added.