09/08/2011 05:31 pm ET Updated Nov 08, 2011

Senate advances bill for flood insurance

By Lisa Lambert

WASHINGTON (Reuters) - A Senate committee advanced a bill to approve billions of dollars in funding for national flood insurance just weeks before the troubled program is set to expire and as a series of storms swamps the country.

The bill would reform the National Flood Insurance Program, which insures millions of U.S. property owners, and keep it afloat for five years.

It must go to the full Senate for a vote and then be reconciled with the version the House of Representatives passed this summer.

It is unclear if that will happen before the program is due to expire on September 30, but members of the Senate Banking Committee were optimistic about the progress.

"We've worked hard on this. We've worked on it for years. It's a complicated bill and I think we're going in the right direction," said Senator Richard Shelby, the most powerful Republican on the Banking Committee.

The bill would address premium increases, levy-building, business interruption insurance and floods in progress. Both Democrats and Republicans on the committee, though, described it as unfinished.

"We have agreement in principle. We couldn't cross all of our T's and dot all of the I's last night," said New York's Charles Schumer, a Democrat.

The NFIP insures homeowners against flood damage and is virtually the only place to get protection against storms.

It is managed by the Federal Emergency Management Agency. Policies are sold by dozens of private insurers, with premiums going to FEMA.

The NFIP had to be bailed out by taxpayers after it was swamped by claims from Hurricane Katrina in 2005. Now it is roughly $18 billion in debt and unable to pay the money back.

A series of abrupt program expirations and annual renewals have created uncertainty and roiled the market.

"I want a full-blown multi-year reauthorization. I don't want to let up pressure on that at all," said Senator David Vitter, a Republican from Louisiana.

"But I think it's going to be clearly uphill to do that before September 30. I hope we all work together and make sure well ahead of September 30 we pass any necessary extension."

While August's Hurricane Irene was not as strong as Katrina, it caused severe and widespread flooding in some of America's most populated -- and most expensive -- areas. As Vermont and other Northern states recover from Irene, Southern states are currently contending with Tropical Storm Lee and the country is bracing for a hit from approaching Hurricane Katia.

(Reporting by Lisa Lambert, additional reporting by Ben Berkowitz in New York, editing by Matthew Lewis)