The administration supports leaving wind coverage to the well-developed private market for such insurance and not creating a federal program for wind losses, Assistant Secretary for Economic Policy Phillip Swagel said in testimony before the House Financial Services Subcommittee on Housing and Community Opportunity.

Ah, well. That's that.

Although NU's Dave Postal reports that Democrats on the House Financial Services Committee might try to resurrect the concept by adding a windstorm coverage provision to H.R. 1862–a bill introduced earlier that would reform the NFIP and increase its borrowing authority–I think you can pretty much write off this initiative.

Such legislative maneuvering is standard operating procedure in the convoluted halls of Congress, but I doubt this gambit will succeed. Either the offending provision will be stripped out before the final vote, or it will kill flood insurance reform altogether for this session.

Rep. Gene Taylor, D-Miss.–sponsor of H.R. 920, the Multiple Peril Insurance Act of 2007–did not take the week's setbacks well. You may recall that Rep. Taylor has an axe to grind, finally settling his own suit against State Farm for Hurricane Katrina damages in January. He's been on a crusade to make the industry pay ever since.

As reported by NU's Matt Brady, Rep. Taylor, in his own testimony, said that his treatment proves insurers handled such claims poorly. If they do that [deny a claim] to a congressman, what do you think they do to a school teacher, a football coach, or a retired petty officer? he lamented.

Actually, in my view, the fact that insurers denied claims by such powerful people as Rep. Taylor and Sen. Trent Lott, R- Miss., proves exactly the opposite point–that no matter who you are, carriers will stand by policy language excluding flood-related losses, as well as wind damage concurrent to uncovered flood losses. (Whether the anti-concurrent-causation clause is fair, understandable and reasonable is an argument for tomorrow's blog).

What would Rep. Taylor have his insurer do? Pay the claim just to keep him happy, even if it means paying an uncovered loss, so that he won't be tempted to abuse his office by taking retaliatory steps–such as trying to overturn the industry's longstanding federal antitrust exemption? Wouldn't that be bribery?

The settlement might be an indication that the insurer made a mistake–or simply cannot afford the time, legal costs, potentially crushing damage award judgment and bad publicity that could result from a lengthly court battle.

Rep. Taylor also vented his spleen against insurance officials who testified to defend the industry's performance and warn about the potential pitfalls of an all-perils federal policy. You have earned your pay, he said of such witnesses, while resurrecting the bogus charge that the industrys antitrust exemption allows insurance executives to call each other up and say lets raise our rates.

That's just not true, but few members of Congress ever allow the truth to get in the way of a good lambasting of their political enemies–right or wrong.

Where do we go from here? There's no doubt there are major cracks in this system, but how do you fill those gaps without destroying the overall home insurance market?

Merely adding wind to the federal flood program is apparently a non-starter as long as President Bush rules the White House.

However, I can't help but wonder, is it time for insurers to write flood endorsements into their policies, if consumers want them to and are willing to pay for the added coverage? As long as actuarially-sound rates are permitted to be charged (a HUGE if, I know, given the inclination of states in cat-prone states to artificially suppress homeowners rates), what is the downside here?

What do you think?