Panel approves bill revamping federal flood insurance program

The House Financial Services Committee approved legislation Thursday to revamp the federal flood insurance program by requiring owners of vacation homes to pay fair-market rates for policies.

By voice vote, the panel approved the bill sponsored by Financial Services Capital Markets Subcommittee Chairman Richard Baker, R-La. The legislation would shore up the insurance program, which is funded by premiums and administered by insurance companies and is an estimated $23 billion in debt from claims for hurricanes Katrina and Rita.

Under the program, owners of older residences that have been in the program for a lengthy time pay less for their policies than newer homeowners who must follow more stringent flood zone requirements. The bill would require policyholders with vacation homes to pay fair-market rates for their premiums.

The bill also would raise the cap on annual premium increases from 10 percent to 15 percent and offer policyholders optional coverage so they could replace contents of their damaged residence at current market value, rather than basing reimbursement on depreciation.

The panel defeated 45-10 an amendment by Rep. Jeb Hensarling, R-Texas, that would have required all policyholders to pay fair-market rates.