FEMA’s Craig Fugate Concerned Over Windstorm Coverage Option in Multi-Peril Insurance Act

Apr 21, 2010


Former Florida Division of Emergency Management Director Craig Fugate (now Federal Emergency Managment Agency {“FEMA”} Administrator) joined several panels of speakers today, April 21, 2010, for a U.S. House Financial Services Subcommittee hearing on legislative proposals to reform the National Flood Insurance Program (“NFIP”). 

Mr. Fugate cited the NFIP’s current debt burden as a “major challenge” and voiced his concern in regard to H.R. 1264.  Also known as the Multi-Peril Insurance Act, the bill would amend the NFIP to allow for the purchase of multi-peril coverage and optional separate windstorm insurance.

He explained that under a multi-peril federal program, the liability for multi-peril insurance is currently absorbed by the private property insurance market, but would be transferred to the U.S. Treasury and, ultimately, to the American taxpayer.

Notwithstanding the bill’s language, a Federal program will face pressures to set aside risk-based pricing and offer subsidized government insurance.  If it lowered insurance prices below the actuarially-fair value, Mr. Fugate said, such a program would encourage people to take on more risk than if they faced the full expected costs of damages.  In addition to the riskier behavior, federal participation in the wind insurance market would displace private markets and mandate an unfair cross-subsidy burden on taxpayers, he added.

In closing his testimony, Mr. Fugate related that FEMA’s strategy to increase participation in the NFIP includes promotion of the Community Rating System (“CRS”), which is a voluntary program that provides flood insurance premium discounts to policyholders in communities that adopt and enforce floodplain management programs with standards that exceed NFIP minimums.  The CRS includes 10 rating classes providing successively greater insurance premium discounts based upon the floodplain management practices of a community.

Hyperlinks to Mr. Fugate’s and other written testimonies are provided below:


Panel One:

Panel Two:

Panel Three:

  • Mr. David R. Conrad, Senior Water Resources Specialist, National Wildlife Federation
  • Mr. Mark Davey, President and Chief Executive Officer, Fidelity National Financial Specialty Insurance Group on behalf of the Write Your Own Coalition
  • Mr. Larry Larson, Executive Director, Association of State Flood Plain Managers
  • Mr. John Rollins, President, Rollins Analytics, Inc.
  • Mr. Barry Rutenberg, Second Vice Chairman of the Board, National Association of Homebuilders
  • Mr. Maurice Veissi, Veissi & Associates, First Vice President,  National Association of REALTORS

Available Member Statements: Congressman Childers, Congressman Putnam, Congressman Loebsack

Insurance Bill Markup on Thursday

The U.S. House Financial Services Committee will hold a markup session on Thursday, April 22 at 2:00 p.m. on the following bills:

  • H.R. 2555, also known as the Homeowners’ Defense Act of 2009
  • H.R. 1264, also known as the Multiple Peril Insurance Act of 2009
  • Draft legislation relating to the Flood Insurance Reform Priorities Act of 2010

To access a live webcast of tomorrow’s markup session, click here.


Should you have any questions or comments, please contact Colodny Fass.


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