Insurers debate possible role in flood insurance.

The question of whether insurers should act as administrators of the National Flood Insurance Program has become a top item of debate within a national natural disaster plan that's under consideration by legislators and state insurance regulators.

At a session of the National Conference of Insurance Legislators Annual Meeting in Napa, Calif., insurance industry advocates appeared to be in accord on one thing: Such a plan would result in an "administrative nightmare" that could set the scene for lawsuits.

Don Griffin, president of personal lines for the Property Casualty Insurers Association of America, said the proposal would change the current relationship between insurers and the NFIP, for which insurers currently write 95% of all flood policies.

Coverage is also an issue. It may be confusing for homeowners who would be covered for wind under the insurer and flood with the insurer acting as an administrator of the NFIP, with policy language different for each type of coverage, Griffin said.

Specifically at issue was an overview draft of a white paper under joint consideration with the National Association of Insurance Commissioners. The group's acting chairwoman, Nebraska state Sen. Pamela Redfield, worked to address the first of the three layers included in the plan.

David Foy, chief of staff at the Florida Office of Insurance Regulation, said the current rendition of the NFIP just doesn't work.

"The question is, can states handle a $400 billion loss?" Foy asked legislators. "This draft answers the question as to what states can do individually and collectively." Foy added that, since 1978, Florida has paid $4 billion more into the NFIP than it received back in claims payments.