The new flood program language supersedes legislation passed by the House on July 29 that would have extended the current NFIP until March 31, 2010, while talks continue to work out differing House and Senate concepts for a revamped flood program.

The July House measure would have added a provision introduced as separate legislation by Rep. Doris Matsui, D-Calif., aimed at making it easier for states and local communities to restore or improve their flood protection systems.

Original authorization for the NFIP expired on Sept. 30, 2008. The current program has been extended several times since then because the House and Senate have been unable to find common ground on a new bill.

The NFIP, which insures approximately $1 trillion in properties in flood-prone areas, came under fire from the GAO, which issued a report last month citing what it found to be lax oversight of insurers that write and administer policies for the program.

A key congressional controversy over the NFIP bill is whether to include a provision from House-passed legislation that would add wind damage coverage to the program. That measure is opposed by all sectors of the insurance and reinsurance industries.

Among other key differences is a Senate bill proposal to pay off the approximately $20 billion deficit in the program created by huge claims sustained during Hurricanes Rita and Katrina in 2005. The House bill has no such appropriation and calls for a study about how the deficit should be dealt with.

In exchange for paying off the debt, the Senate bill language includes steps to deal with properties that are the subject of repetitive flood claims. It calls for the use of updated maps to designate flood-prone areas and creation of a system to remove repetitive claimants from those areas.

The Senate bill also proposes creation of a nonpartisan commission to examine the proper approach to managing catastrophic risk. Neither provision is included in the House version.

And in a provision opposed by the insurance industry, the Senate bill establishes an "ombudsman" within the Federal Emergency Management Agency whose job it will be to ensure that the 93 private participating insurers who sell the coverage for the government properly adjust damage claims so the flood program does not pay for wind damage for which insurers are liable under standard homeowners coverage. The House bill does not include such a provision.

At the same time, the House bill also tightens language dealing with state laws that lawmakers in Louisiana and Mississippi argue allow private insurers to slough off all of their liability for losses covered by hurricanes to the government.

These provisions hold private insurers harmless for claims when damage is at least partly caused by a flood.

Meanwhile, the GAO study will likely complicate the debate over reform. GAO proposed several changes for the "Write Your Own" program that it believes could save money, including contracting with a single insurer.

As it now operates, participating insurers write and service the standard government flood insurance policy in their own names, receiving an expense allowance for policies written and claims processed, while the government pays losses.

Other GAO proposals include replacing the NFIP's current payment system with a competitively awarded contract that could lower costs for selling and servicing flood insurance policies and administering claims.

However, the agency cautioned, "each alternative involves trade-offs in terms of the impact on the program's basic operations that would have to be considered."

GAO said that when it compared expense payments FEMA made to six WYO insurers for 2005 through 2007, it found the payments exceeded actual expenses by $327.1 million, or 16.5 percent of total payments made.

Officials of the National Association of Professional Insurance Agents said they doubted whether any of the GAO's proposals for change in the WYO program would be effective.

"Although improvements can always be made to increase efficiency, PIA is skeptical that a centralized service entity approach is the answer," a representative said.

The PIA official said that past federal authorities responsible for the NFIP program employed this structure several times over the decades.

"Each time, it was managed by different administrations' FEMA officials contracting with different vendors, and it proved a costly failure," said the PIA official, adding that "the failures of centralized service entity approaches led the GAO, in past reports, to recommend the WYO program in the first place."

The GAO report found FEMA has not implemented all the financial controls and procedures for the WYO programs that it has established. In addition, the report said, FEMA did not systematically track the outcomes of the various audits, inspections and reviews that it performed for the 10 WYOs included in this review of FEMA's oversight of the program.

"Because FEMA does not implement all aspects of its control plan, it cannot ensure that the WYOs are fully complying with program requirements," GAO said.

PIA officials noted that the $17 billion deficit in the NFIP program incurred because of Hurricanes Katrina and Rita in 2005 is what has prompted congressional concern about the NFIP program and its WYO program.

However, the PIA noted, "attributing the debts incurred in the flood insurance program subsequent to the 2005 hurricanes primarily to FEMA's management of the program belies the fact that four major hurricanes striking the United States in two years caused extensive flooding losses that exceeded reasonable reserving."

PIA added that "just several years prior to these events, Congress moved monies from NFIP premium reserves–which at the time were described as excessive–to offset FEMA operating expenses and redirect the savings to other federal government programs."