Out of the Storm News

The U.S. Senate will approve a 60-day extension of the National Flood Insurance Program this week before moving on to a vote on a full five-year reauthorization of the NFIP, under a deal struck late May 23 between Senate Majority Leader Harry Reid, D-Nev., and Sen. David Vitter, R-La.

Vitter and Reid announced the deal on the Senate floor, including a commitment to vote on the full NFIP reform bill prior to the July 4 recess. As part of the agreement, Vitter will withdraw his motion to attach NFIP reform as an amendment to an FDA reform bill. Reid is seeking a unanimous consent vote today on a 60-day extension. Without an extension, the NFIP is scheduled to expire May 31.

“The National Flood Insurance Program has been barely hobbling along with a Band-Aid approach – extending it for short periods of time. Reaching an agreement to allow the Senate to fully debate this on the floor and to work on getting it reauthorized for five years will be great, much needed news for homeowners and the housing market,” Vitter said in a statement. “Moving the ball forward on this is a big, big step, especially as we approach hurricane season.”

Along with Sen. Jon Tester, D-Mont., Vitter has been the Senate’s strongest advocate of NFIP reform. The pair co-sponsored legislation – cleared by the Senate Banking Committee in September 2011 – that would phase out subsidized NFIP premiums for repetitive loss property, second homes and businesses, while also requiring it to build a catastrophe reserve and permitting FEMA to buy private reinsurance or issue catastrophe bonds to shore up the program.

The program remains about $18 billion in debt, largely from a catastrophic level of claims following 2005’s Hurricane Katrina.

As the staff of the Heartland Institute’s Center on Finance, Insurance and Real Estate transitions to R Street, Out of the Storm News is going to be transitioning as well. Over the next few months, many of the features you see here will be transferred to  R Street’s soon-to-launch Word on the Street blog, which will be hosted at our main RStreet.org website. For the time being, R Street will be keeping the URL for Out of the Storm News. Over time, however, we’ll be merging much of OOTS into Word on the Street. The transition will be gradual and, obviously, we’ll keep all of our readers posted.

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At this point, it appears almost inevitable that the National Flood Insurance Program is going to have at least one more short-term extension—probably until June 30—before Congress is able to pass a long-term reauthorization. I strongly support reauthorization, as do both R Street and, insofar as I can still speak for it, Heartland. A few of my conservative friends have raised questions about the program, the way it works, why conservatives should support reauthorization in the first place, and what good any reauthorization would do. These are legitimate questions and I’d like to answer them. Basically, there are at least three reasons why conservatives and others who want to see the program either eliminated or significantly reduced in scope should support reauthorization now.

Ending the program is more expensive to taxpayers than keeping it in place: If the program ended, the federal government would still have to produce flood maps, pay interest on NFIP debt, and pay claims on policies that hadn’t yet lapsed. Relief costs also might rise.  Not counting these presumably higher relief costs, the Congressional Budget Office has estimated that the program’s termination would cost $2 billion the first year and, as a realistic matter, every year thereafter. The current NFIP (measured by the amount of debt it has accumulated) costs about $450 million a year.

The private sector hasn’t stepped forward and probably wouldn’t: In the main, there’s no evidence that private companies will write flood insurance in the short term. I know this for a fact. I tried to find someone who would step forward to say, “we’ll help privatize” and nobody would. Not one company. Not without reason, private insurers are very skittish about writing flood cover even if they write it in other countries. American states can use their rate regulatory power to try to force them to write flood insurance below cost. This could be a disaster. Given that homeowners insurance, in the best of times, is only marginally profitable–that’s why mutual companies, often focused and incented based on market share growth rather than profits, per se, write most of it—nobody is going to be anxious to enter the market. The case for, say, privatizing Medicare right away (which I wouldn’t support), actually is a lot stronger than the case for getting rid of flood insurance: America currently has scores of private health insurers, but no private flood insurance for most properties.

The reauthorization makes privatization possible: The reauthorization does not privatize NFIP and does not require it to become private. That’s still a battle for later. But it does raise most rates to actuarially adequate levels where the private sector could (and may) start writing policies. It also gives the program’s administrators the option to purchase private reinsurance. If both of these measures—risk based rates and private reinsurance—became a reality, then the need for the program will begin to wither away. Half a decade hence, indeed, it may be possible to generate enough private market interest to make privatization a realistic and cost effective policy course.

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About three months ago, thinking about my future career, I bought a book about how to become a non-profit CEO. It was a long-term career goal of mine, something I thought might happen in a few years. For a variety of reasons, however, things have sped up and now it appears that I’m going to become a non-profit CEO very quickly—next week, in fact.  R Street is ready: we are incorporated, have a bank (actually, a credit union) account, a staff of six and we’ll have a web page launched by June 1. By think tank startup standards, R Street is pretty big. By D.C. think tank standards, of course, it’s still tiny. But it’s real. And it’s moving forward.

The College Illinois! savings program has been plagued by weak financial controls and conflicts of interest between top administrators and companies hired to invest millions of dollars from the prepaid tuition fund, according to the state auditor general.

The auditor general’s report covers 2006 to 2011, when the commission that oversees the program approved a series of what many considered risky investments — including $12.8 million that went to ShoreBank just two years before the bank collapsed.

The fund also suffered from fast-rising administrative costs, investment returns that fell well short of projections, and college costs that were rising much faster than the cost of inflation, according to Auditor General William G. Holland.

May Not Meet Obligations

College Illinois! is so poorly underfunded the program has stopped enrolling new participants and may not be able to meet its existing obligations. Financial consultant Gabriel Roeder Smith & Co. late last year said the program could go insolvent without a $1.6 billion bailout. With no new College Illinois! contracts, the program’s shortfall will develop between 2022 and 2036 to pay for past contracts coming due.

College Illinois!, like similar programs in other states, was designed to be a “worry-free way to pay for college.” It enabled an estimated 33,000 families to lock in tuition payments for 55,000 future students. But the program was put on hold after audits showed massive shortfalls tied, in part, to declining sales and large tuition increases.

“One of the problems with these prepaid plans is that it is very difficult to catch up if you fall behind,” said Joe Orsolini, president of College Aid Planners, Inc., in  Glen Ellyn, Ill. “After the earlier market downturn, they made riskier investments to try to make up the deficit.”

Illinois tops average costs

But the financial market downturn is not solely to blame. College costs nationally have been rising nearly 6% a year for the last four years, while returns on the Dow Jones Industrial Average have been a full percentage point behind, Orsolini said. So even prudent investing would have left fund shortfalls.

And costs at Illinois colleges and universities have climbed faster than the national average. The University of Illinois at Urbana-Champaign is now one of the five most expensive state universities in the nation, and University of Illinois-Chicago is the ninth most expensive, according to Orsolini.

Part of the reason for the big cost increases at University of Illinois campuses was a decision by university trustees several years ago to give four-year tuition guarantees to students who enter as freshmen. Trustees have accelerated tuition increases to cover the guarantees, according to Orsolini.

But underfunding of the program by the state government, failure to adjust to quickly rising college costs, exaggerated expected returns on investments, and poor investment decisions have all contributed to the program’s financial shortfall, according to financial planning experts.

“College savings programs are big business in this country, with more than $130 billion invested as of 2010. The details behind the College Illinois! program are startling to say the least,” said Andrew Schrage, co-owner of Money Crashers, a Chicago-based personal finance site geared to young adults and teens.

‘Damage already done’

“Late last year, the governor of Illinois finally stepped in and replaced the entire oversight committee. But the damage had already been done. There were obvious conflicts of interest from both portfolio managers of the program itself, as well as members of the committee overseeing it.”

Schrage added: “These types of programs can work as long as full disclosure is in place for all portfolio managers and committee members. Also, it seems that if the federal government established a national oversight committee, conflicts of interest would be less prevalent. Whoever is in charge of overseeing these programs needs to insist on getting the details on any proposed investment and vetting the investment for conflicts of interest and level of risk.”

If the state does bail out the program so that it can continue, Schrage recommended administrators lower their promises and expectations for future returns for any new participants. However, with the bad publicity College Illinois! has received as a result of this financial fiasco, Schrage said he has doubts about the program’s ability to attract future participants.

In a 402 to 18 May 17 vote, the U.S. House of Representatives approved H.R. 5740, a bill sponsored by Rep. Judy Biggert, R-Ill., that would extend the National Flood Insurance Program through June 30.

Dubbed the National Flood Insurance Program Extension Act, the measure seeks to avoid the massive market dislocations that would follow for the program’s 5.6 million policyholders should it be allowed to lapse. The NFIP, which has been extended 17 different times since its last long-term reauthorization expired in September 2008, is currently set to expire May 31 unless otherwise extended by Congress.

Seventeen Republicans and one Democrat (Rep. Pete Visclosky, D-Ind.) voted against the extension. Among those voting nay was Rep. Candice Miller, R-Mich., who has been perhaps the most vocal member of Congress in advocating immediate privatization of the NFIP.

In addition to extending the program, Biggert’s bill includes language that would direct federally regulated banks, Fannie Mae and Freddie Mac to accept private flood insurance as satisfying mandatory purchase requirements for federally related loans. The measure calls on the Federal Emergency Management Agency and U.S. Government Accountability Office to prepare reports on ways to privatize the flood program. It also asks that FEMA evaluate NFIP’s claims-paying ability, and how the use of private reinsurance or alternative risk transfer mechanisms would compare with its current statutory authority to borrow up to $20.75 billion from the U.S. Treasury.

All of Biggert’s tweaks are fantastic, pro-market ideas, but it’s yet not clear if this bill will be taken up in the Senate, where the clear preference has been for a “clean” extension that doesn’t change anything about the program’s current structure.

Of course, the House already passed a five-year reauthorization of the program last summer, one which includes a number of needed reforms for the NFIP, which carries a $17.775 billion debt it likely will never be able to pay off. Key among the reforms is phasing out premium subsidies that are extended to properties built before the introduction of flood insurance rate maps in the mid-1970s. These subsidized policies, estimated to be roughly 20% of all NFIP policyholders, pay only about 35% to 45% of the full-risk cost of flood insurance.

The hang-up has been in the Senate, where a similar bill was approved by the Senate Banking Committee last fall but has yet to move to the Senate floor. Sen. David Vitter, R-La., who has spearheaded efforts to push the Senate’s long-term reform bill through that chamber, also has introduced a bill that would temporarily extend the program through the end of the year.

Earlier this week, Senate Majority Leader Harry Reid, D-Nev., asked for unanimous consent on Vitter’s bill, but faced a hold-out from Sen. Tom Coburn, R-Okla., who said that he would not vote for an extension until there was a commitment from Reid to bring the reform bill to the floor. The pair have reportedly reached an agreement to bring the full reform bill to the floor, perhaps as early as next week, if Senate Republicans agree to limit themselves to “one or two” floor amendments.

“I will continue working with my friend maybe there’s some way that we can work together, figure out a way to move this forward,” Reid said. “If my friend from Oklahoma would be also make a decision on his side to have, as he indicated cogent amendments, relevant amendments we could put this in a little package and move to it without having to file cloture. So I’ll work on my side to find out what amendments there are. And if my friend can do that on Monday or Tuesday we’ll talk about this and see if we can get a very concise agreement —this is very important legislation.”

In response, Coburn said he would check with Senate Republicans on whether they could come to an agreement on how many amendments to attach to a long-term extension so that Reid would not be forced to file cloture and the legislation could pass the Senate quickly.

“I appreciate what the majority leader has said and I will work my side of the aisle to see if a possibility of moving this is there and will give it my hundred percent effort between now and next Monday when I see the majority leader to see if we can’t do it,” Coburn said.

Even if the Senate does vote on the full five-year flood bill next week, some sort of short-term extension will likely be needed, as the House and Senate will need time to reconcile the two bills. Though the two chambers are closer than they’ve been in quite some time on flood reform issues (in recent sessions, debates over adding windstorm insurance to the program and forgiving the NFIP’s debt doomed efforts to bridge the gap) there are some differences that could prove at least moderately controversial.

There are also a handful of senators who want more significant changes to the final bill. Most notable have been Sens. Thad Cochran, R-Miss., and Mark Pryor, D-Ark., who want properties that lay behind levies and other flood mitigation structures and are newly mapped into flood zones to be exempt from the guaranteed purchase requirements.

Nonetheless, it’s looking brighter than it had in recent months that the Senate could take up the full bill and pass a short-term extension, which would then be sent back to the House for action when they return May 30 from next week’s recess.

The Actuarial and Underwriting Committee of Florida’s Citizens Property Insurance Corp. is planning a July 16 “workshop” to discuss a plan to begin assessing full, actuarially indicated rates for new customers, before deciding whether to recommend the plan to Citizens’ full Board of Directors at its July 27 meeting.

That decision was made at the committee’s May 17 meeting, much of which was devoted to responding to recent hyperventilating rhetoric from certain Florida lawmakers and media outlets regarding the impact of the plan.

Citizens’ problems date back at least to 2007, when the Legislature forced the former “insurer of last resort” to roll back and freeze its rates across the board. As the state-run insurer’s rolls swelled to unsustainable numbers (at 1.4 million policies, it is now Florida’s largest property insurer), the Legislature in 2010 finally decided to undo some of the damage it had caused, allowing Citizens to pursue a “glide path” toward shedding policies by permitting it to increase rates by up to 10% annually.

But that change hasn’t quite had the desired impact, and Citizens continues to see its policy count rise today. Moreover, as reported by Citizens board member John Wortman at the full board’s last meeting, Citizens’ personal lines and commercial residential rates are currently 42.3% short of the levels actuaries would consider adequate, while commercial nonresidential rates are 75% below the actuarially indicated levels.

Thus, the board has been exploring an area where the 2010 legislation has always been somewhat murky. While the law certainly does bar Citizens from raising rates by more than 10% for any given policy, it’s never been clear whether (and how) that restriction could be applied to new policies. After all, a new policyholder, by definition, can’t experience a rate “increase.” When he or she applies for a Citizens policy, they are assigned an entirely new rate altogether.

This is not just a matter of semantic trickery. Citizens is bound by law, not to mention by sound insurance practices, to charge rates that are actuarially sufficient. To do otherwise is to risk insolvency. Obviously, Citizens can’t charge actuarially indicated rates if it is explicitly barred by law or regulation from doing so. But if it is not, then not only CAN it do so – it must.

Of course, there already has been the inevitable blowback to the rate hike plan, led by state Sen. Mike Fasano, R-New Port Richey, and to a lesser extent, even Chief Financial Officer Jeff Atwater. Most recently, state House Majority Leader Carlos Lopez-Cantera, R-Miami, wrote to Citizens President Tom Grady that the plan “would be a blatant circumvention of state law and not in the best interest of the state of Florida and its residents.”

But leaving aside the obvious point that it is not in anyone’s interest, least of all Citizens policyholders and Florida taxpayers, for the state’s largest property insurer to be charging unsustainably low rates that could drive it to insolvency, what actually would be the impact of the committee’s plan?

Based on estimates that use last year’s actuarial assessments (the figures for 2012 will not be complete until early July) as a gauge for the plan, current overall rates for new policies are roughly 30% below actuarially indicated levels. In coastal regions, where Citizens currently has $822 million of premium in-force, the difference between the capped and actuarially indicated rates is about 54.5%. In non-coastal regions, where the company has $939.5 million of premium in-force, the difference is 18.9%.

All told, should Citizens continue to attract the same number of new policies, the higher rates would mean a revenue increase of about $32.2 million on coastal policies and $66.9 million on non-coastal policies, or about $100 million combined in new annual premium revenues.

Except, of course, that the insurer would NOT continue to attract the same number of new policies. If new policyholders had to pay the full actuarial cost of the risks they are transferring to Citizens, many of them would instead opt for private coverage, either from an admitted homeowners insurer or from a surplus lines carrier. Indeed, that’s precisely the point. As currently structured, Citizens is, in effect, engaged in predatory pricing, charging rates so perilously low that if they were charged by a private insurer, one without the power to lay taxes on the rest of the market, they could not possibly hope to cover their obligations.

Existing Citizens’ policyholders have come to rely on those suppressed rates, and thus, it is understandable to want to ease their transition to the higher rates that, nonetheless, it is imperative they eventually be made to pay. But there is no possible justification for extending that treatment to NEW policies, as well.

Over the next couple months, expect to hear a lot of debate about “legislative intent” by lawmakers who take credit for crafting the 2010 glide path bill. Though it has punted on its responsibilities on numerous occasions, the Legislature has been quite clear that it would like to see the number of Citizens policies shrink. And that goal is just simply not attainable so long as the company continues to provide incentives for policyholders to choose the state-run insurer over private alternatives.

The Texas Windstorm Insurance Association’s board of directors on May 15 voted to approve a 5% rate increase for 2013, but a separate plan to institute higher “territorial” ratings for the highest risk regions has been shelved until at least August.

If the rate increase is approved by Insurance Commissioner Eleanor Kitzman, 2013 would mark the third straight year TWIA instituted a 5% rate hike. In 2009, the association raised rates by 10%.

Last month, TWIA’s Actuarial/Underwriting Committee forwarded to the board a plan for an overall 4.7% rate hike on residential properties and 1.7% on commercial properties. The board also proposed territorial adjustments that could see rates fall by as much as 10% in some areas and rise by as much as 10% in others.

Under current state law, rates within each of the 14 Tier 1 counties that participate in the association cannot vary by more than 8%. The actuarial committee’s recommendations would divide each county into between one and four territories. TWIA covers roughly 200,000 policyholders across its territory.

The committee’s recommendations were made in response to analysis by actuarial consulting firm Merlinos and Associates, which showed that TWIA would need $4.8 billion of claims-paying resources to cover losses following a 1-in-100-year storm. Including both $436 million of premiums and other income and $2.5 billion of post-event bonds authorized by the Legislature, TWIA could only cover up to $3.79 billion in losses. The firm estimated a 27% chance the agency could not cover all of its liabilities.

Merlinos’ analysis found that Galveston County and parts of Harris County were the riskiest areas for TWIA.  The Galveston Daily News reported that representatives of the Coastal Windstorm Insurance Association, former Galveston Mayor Henry Freudenburg and state Rep. Craig Eiland, D-Galveston, were among those who appeared at the May 15 meeting to implore the board to hold off on approving the territorial rating plan.

Lowering rates in some areas doesn’t make sense, Eiland said. It would just be a disincentive for private insurance firms to provide coverage and would only mean more people signing up with the windstorm insurance association.

Meanwhile, dramatically raising rates in other areas would hurt policyholders who have nowhere else to turn for insurance, he said.

“None of us get dramatic pay raises,” Eiland said.

The board’s next meeting is actually scheduled to be in Galveston on Aug. 7, when the board will likely decide the fate of the territorial rating plan, the Texas Tribune reported.

Mike Gerik, TWIA board chairman, indicated that the proposal for such territorial rate changes is not off the table, and could be approved at a later time in addition to the 5 percent overall rate increase. If the board approves the territorial rate changes, it “would be up to the [insurance] commissioner to decide whether or not we can take that much rate,” he said.

TWIA, which was rendered nearly insolvent by Hurricane Ike in 2008 and by a torrent of litigation that followed the storm alleging claims-handling problems, was placed under administrative oversight by the Texas Department of Insurance early last year. Kitzman has hired consulting firm Alvarez and Marsal to evaluate possible ways to restructure the association.

The Federal Reserve Board made history this past week, for the first time giving approval for a Chinese bank to purchase a U.S. bank.

The Fed approved applications by China’s largest bank, the $2.5 trillion Industrial and Commercial Bank of China Ltd., as well as China Investment Corp. and Central Huijin Investment Ltd. to become bank holding companies after jointly acquiring up to 80% of the voting shares of New York-based The Bank of East Asia (U.S.A.) National. Bank of East Asia has 13 branches in New York and California and about $621 million in deposits.

Not coincidentally, the Fed also approved applications by Agricultural Bank of China Ltd. and Bank of China Ltd. to open bank branches in New York and Chicago, respectively. The applications had been pending for as long as two years.

As reported by USA Today, the approvals followed “high-level talks last week between the United States and China.”

In those talks, which were overshadowed by a dispute involving a Chinese dissident, China agreed to let foreigners including U.S. companies have bigger stakes in its securities firms and make other concessions designed to give foreign firms greater access to the U.S. market.

Treasury Secretary Timothy Geithner, who along with Secretary of State Hillary Clinton headed up the U.S. side for the annual discussions, said at the conclusion of the talks Friday that China had made “important steps” that would translate “into greater opportunities for U.S. workers and companies.”

There is, of course, no especially compelling reason to bar Chinese firms from accessing the U.S. financial services market, including through mergers and acquisitions. Frankly, we could use the capital.

But there is a certain irony in federal priorities here. Sabre-rattling aside, China does remain a strategic rival of the United States. And these aren’t simply banks headquartered in China: they are, like most of that nation’s major firms, state-controlled. The Chinese government owns 71% of Industrial and Commerce Bank, for instance.

And yet, while these state-controlled foreign banks will be permitted to expand their operations in the United States and free to make loans to U.S. small businesses, community-oriented, nonprofit credit unions are still constrained by regulations that don’t allow them to devote more than 12.25% of their assets to business lending. That is a striking disparity.

(This article originally appeared in The Huffington Post.)

If Mitt Romney wants to win the election and become president, he should come out and support gay marriage. Doing so will work not so much because it’s consistent with conservative principle (which it is) and generally popular (that too) but because it will fracture Obama’s base.

Let’s start with why marriage is right from a conservative perspective. Conservatism is, as Russel Kirk wrote a “body of sentiments, rather than… a system of ideological dogmata.” And, as such, it has to evolve with the times. In a very different society where two-parent marriage was essentially the only setting in which children could be raised, divorce was very difficult to obtain, premarital sex frowned upon by “respectable” people, and co-habitation without marriage virtually unknown amongst the well-educated; it’s possible that having the state stand for one-man/one-woman-only marriage could make sense.

But that’s not how modern society works. Gay and straight Americans alike enter into a lot of different types of partnership arrangements. Some of these are clearly undesirable. But others — committed heterosexual couples who live together long-term without marriage, committed same-sex couples raising children together — bring many of the same social benefits as marriage. Making these relationships stronger and granting them legal recognition is a good idea if one wants to create a society where families, houses of worship, and other voluntary institutions, not government, does most things.

Second gay marriage is a winning issue. In the wake of the President’s announcement that he supports gay marriage, Americans’ positions are changing — quickly. For the first time, outright majorities of Americans in big, well-controlled national polls say that they support gay marriage. While simply looking at polls doesn’t always tell you what will get votes — easing of restrictions on gun ownership is generally unpopular but nonetheless a winning political issue for many candidates — they’re nonetheless a decent guide. And now, a majority of Americans want gay marriage.

This matters because current polls show Obama holding a rather narrow lead in the popular vote and a bigger one in the electoral college. Overall, this means that his positions and person are more popular than Romney’s. The problem for Romney that much of President Obama’s true base, a bit of 40 percent of the vote is simply not going to vote for Romney under any circumstances. Despite a lackluster economy, the President has delivered pretty well for union bosses, businesses that rely on government subsidies, government workers, current college students, and others who make up the Democratic base. For a variety of reasons — including the historical nature of his presidency — African-Americans (who, polls show, generally oppose gay marriage) can also be expected to cast ballots for Obama almost no matter what. The bottom line is simple: nothing Romney could do will dislodge most of the Democratic base and he’s best off writing it off.

But gay voters are “getable” in significant numbers and could change the calculus. Beyond the party’s acceptance of them as people — an understandably big deal — there is no reason why gay or lesbian Americans should necessarily belong to either party. Gay government workers, hard-core environmentalists, adherents of age religions, union bosses, and welfare recipients probably should and will vote for Democrats. Gay entrepreneurs, gun owners, pro-lifers, people of traditional faiths, and those just sick of being overtaxed will most often find their interests best met by the GOP. Right now, however, most people in the later group will still vote Democratic just because of the GOP’s rejection of gay marriage. If one goes with low-ball estimates that somewhere around 2-3 percent of the population is gay (and it’s probably twice that) getting even half of the gay vote would almost certainly put Romney over the top. And there’s reason to think he could get more: Marketing data does generally indicate that gay couples are more affluent than the population as a whole and thus likely to benefit from the lower-tax policies that Romney would pursue.

While some voters would certainly be turned off by a Romney endorsement of gay marriage, many people concerned enough to vote against a rock-solid conservative like Romney over gay marriage alone might also vote against Romney for his Mormon faith or previous support for abortion. Sure, endorsing gay marriage has risks but, for Romney, it may be one of the few paths he has to the White House.

Deborah Bailin, Christian Camara, Julie Drenner, R.J. Lehmann, Alan Smith, and I have all submitted our resignations from the Heartland Institute effective May 31, 2012. You can read the press release here.

Matthew Glans, who has been a frequent blogger on this site, will be continuing at the Heartland Institute and focusing on other issues. All of us expect that we’ll continue to work with him and others at Heartland. We’ll be continuing Out of the Storm News and, indeed, all of our other work under a new brand, the R Street Institute. Watch this site—and other Heartland sites—for more information about our transition and set up as a new, independent, non-partisan think tank.

All of us proud of the work we’ve done at Heartland and grateful to our colleagues who will continue to work there after we depart.  Heartland is a vital organization that has done more than any other think tank to advance liberty on the state level.

As R Street, we plan to partner with Heartland and believe that it will continue to do much good work and, indeed, thrive, in the future. Joe Bast, Heartland’s CEO, has been a gentleman and partner in every part of this transition. I have nothing but good things to say about Heartland and my colleagues there. It was a good place to work and, for a little more than two more weeks, still will be.  This isn’t an ending but, instead, a new beginning. We’re excited but we’re also nervous.

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On a more personal note, I am sorry about the billboard that Heartland ran. It was an experiment. It was short lived.  I didn’t create it and didn’t know about it until about five minutes before it launched. Nonetheless, I still work for the Heartland Institute through May 31 and, as such, I feel I owe everyone an apology.  I’ll say it again: I’m sorry. The billboard just isn’t my style or a message that I particularly agree with.

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Back on insurance: the so-called Flood the Hill efforts continued this week. Because of recent chaos, Heartland wasn’t there to take part. But it’s clear the debate won’t end right away. Even if the U.S. Senate somehow votes before May 31, a short-term extension is still going to be needed while the Senate and U.S. House work out their differences. (Although it strikes me as possible that the House could simply pass the Senate bill.)  What seems most likely now is a very short-term extension to June 30, 2012 as Sen. David Vitter, R-La., has proposed. This is probably a decent idea since it keeps alive the possibility that the flood program could get the real changes it needs during 2012.

The problem with short-term reauthorizations is that, in general, they have not compelled action on the flood program or any real reform. The reason for this, in the past, was simple: the House and Senate were simply too far apart. Although I admired him for doing it, Sen. Richard Shelby, R-Ala., was fighting a rather lonely fight when he tried to use the short-term extensions to create pressure on the program.

This time, however, it may be different: a short-term extension does keep the pressure on and, because the House and Senate aren’t that far apart, could result in a real, meaningful reform bill passing during 2012. We can—and should—always hope.

Until next week.

The Heartland Institute has decided to spin off its insurance research project effective May 31.

According to Joseph Bast, president of The Heartland Institute, “We’re convinced this will be a win-win situation for Heartland as well as Eli Lehrer and his team of very skillful and devoted policy experts. We urge any individual, foundation, and corporation with an interest in insurance and related finance issues to contribute to Eli’s new organization once it is up and running. We look forward to working closely with Eli in the future.”

Eli Lehrer, who will continue to serve as director of Heartland’s Washington DC office and its Center on Finance, Insurance, and Real Estate until May 31, said, “Separating our project from Heartland will allow us to focus on the issues that we are best known for and good at. I have worked with The Heartland Institute for many years, and now under a new name, my team and I will continue to ally ourselves with Heartland where we can both work to advance the cause of freedom and free markets.”

Lehrer added, “We thank everyone at Heartland, from Joe Bast, its dynamic CEO, on down for their support and friendship over the years. We look forward to working together for many, many years on our common goals.”

With the National Flood Insurance Program set to expire at the end of May, the Senate Banking Committee’s Economic Policy Subcommittee is hosting a May 9 hearing on the need to reform the program.

Though legislation that would extend the program for five years – while phasing out premium subsidies and opening the program to private reinsurance capital – already has passed the full committee and the U.S. House, officials from the Federal Emergency Management Agency recently asked that the program be extended for two years without any changes.

In written testimony submitted for the hearing by The Heartland Institute’s Center on Finance, Insurance, and Real Estate, Deputy C-FIRE Director R.J. Lehmann contends the program is “not sustainable for an additional two years as it is currently constituted.”

“The U.S. Government Accountability Office placed the NFIP on its list of high-risk federal programs in March 2006, and it has remained there in each successive year. The program is $17.775 billion in debt and can borrow only $3 billion more from the U.S. Treasury under its currently authorized borrowing authority. Given its debt load, NFIP continues to accrue nearly $1 billion in interest annually and the Congressional Budget Office projected in October 2011 that its current borrowing authority likely will be exhausted by or before 2014.

“Extending NFIP for an additional two years with no major changes would create a strong possibility that FEMA will either need to return to Congress to seek additional borrowing power or that the program will become insolvent.”

Lehmann’s complete testimony can be found online here: http://heartland.org/sites/default/files/nfip_comments_to_tester_subcommittee_1.pdf

Florida homeowners purchasing their flood insurance through the National Flood Insurance Program (NFIP) may find their insurance rates increasing next year. According to the South Florida Sun Sentinel, around 2 millions households with NFIP policies could see a rate increase of around 5 percent in the fall. The National Flood Insurance Program, the national flood insurer of last resort, is plagued with debt and is currently being considered for reauthorization.

From the Sun-Sentinel:

“The National Flood Insurance Program, the only source of coverage for 2.1 million Florida households, will raise its rates by an average of 5 percent in October and maybe as much as 20 percent in high-risk areas over the next few years.

Federal officials also have told Florida insurance agents they can no longer provide discounts of up to 15 percent for their customers.

The looming increases are another jolt to home ownership in the state, especially in coastal areas or along inland waterways near sea level, where lenders cannot finance a mortgage without flood insurance. Some of the riskiest areas may even be excluded from coverage, making further development untenable in those parts of the state.

Higher rates are inevitable as Congress lumbers toward revamping the insurance program, which is mired in more than $18 billion of debt.”

Higher rates inform homeowners that their homes are susceptible to catastrophic flood damage. Increasing the cost of living in a flood zone both limits new home construction and prepares homeowners for losses, limiting future disaster assistance covered by taxpayer dollars. NFIP’s rates have been artificially low for years, encouraging unwise construction in high risk areas while rebuilding homes that remain exposed to high flood risk.

These “repetitive loss properties” are one of the biggest concerns NFIP faces. A Congressional report in 2004 found the program costs taxpayers up to $200 million annually, primarily because some properties repeatedly experience flood losses. According to the National Center for Policy Analysis, since 1984 the NFIP has paid out nearly $1 billion for at least 10,000 properties that have experienced two or more losses, with cumulative claims often exceeding the value of the property.

Eli Lehrer, vice president for DC Operations at The Heartland Institute argues in the Sun-Sentinel piece that the rate increases are a necessary step towards making the program financially viable.

“People who receive the most subsidies in risky areas will see big premium increases, probably phased in,” predicted Eli Lehrer, national director of the Center on Finance, Insurance and Real Estate at the Heartland Institute in Washington. “Rates have to go up. The real question is: Will the program be sustainable? It cannot continue at the rates it has now.”

The impact is especially significant in Florida, home to 2.1 million of the nation’s 5.6 million flood insurance policies.

Policyholders in Florida may also lose the rebates they have received in the past on hurricane coverage. Some insurance companies have offered rebates to homeowners who harden their homes against hurricane damage. While mitigation is an important part of hurricane preparedness, these rebates have proven controversial because some homes have used it to bring down their rates even when the improvements made do little to bring down costs. Some homeowners, despite living inland far from the Florida coasts, received rebates for hardening their homes when significant damage was unlikely to occur. Other homes fraudulently received the discounts without making the upgrades.

“The Federal Emergency Management Agency has informed Florida insurance companies that as of Oct. 1 they will no longer be able to provide “rebates,” or discounts that have sliced premiums for some customers by as much as 15 percent.

Ending rebates means that many Floridians will pay more, said Jerry Wahl, president of Statewide Condominium Insurance.

“Times are tough,” he said, “and we believe all businesses should be permitted to conduct operations in accordance with Florida statutes.”

Could pet insurance be a potential model for human health care insurance? A new editorial in the Weekly Standard by Eli Lehrer, vice president for D.C. operations at The Heartland Institute argues, that there are many features of pet insurance that are highly desirable in human health care and that could serve as a model for the future, but it isn’t perfect.

Pet insurance offers many benefits that many human insurance policyholders would kill for: low costs, greater choice in products and services and more flexibility in coverage, all while being regulated primarily by market forces and not government regulation. While Lehrer warns that many of the mechanisms that allow the pet insurance market to work so well cannot be replicated in the health care market, due to layers and layers of rules and regulations, there is ample ground for similar innovations.

From the Weekly Standard:

The market for pet health insurance is a competitive one that offers many popular, desirable policy features—including many that politicians want to impose on the human health insurance industry. But it’s not perfect. A detailed look at the market, the least regulated broad health benefits system in the country, suggests it would be impossible for the human health insurance system to simultaneously do everything people say they desire, contain costs, and follow purely market principles. This isn’t a reason for free market health care reformers to despair but, rather, a cause for them to be careful about what they promise.

The positive aspects of the pet insurance market aren’t trivial. For starters, it offers far more choices. Only 3 companies market individual health insurance in New Jersey, while at least 10 write policies for dogs and cats. And the pet insurance carriers offer plans with benefits to fit any budget. Almost all pet insurance policies provide the same coverage at any hospital or vet, whereas almost all human health policies have no or limited benefits for “out of network” care. While people over 50 can have a very difficult time finding individual health insurance at any price, coverage for older dogs and exotic breeds isn’t a problem since several companies will write a policy for any dog or cat of any age. And many of the features politicians have felt themselves compelled to mandate in health insurance plans are provided by pet carriers as a matter of course. Even very cheap policies often throw in some “wellness” coverage that discounts routine tests and checkups. And the pricing schemes are also more attractive than those in the private individual health market. Although pet insurance premiums rise yearly as individual pets age and veterinary costs go up, many pet insurers don’t increase them on the basis of claims history, and most promise never to drop coverage no matter how sick a pet gets.

Eli emphasizes in his article while pet insurance can provide a useful model for human health care, it does have its own flaws. These flaws are not due to any inherent problems with the market, moral or economic, but rather because “certain aspects of human health simply transcend the economic.”

Eli’s article was mentioned in a Washington Post article by Sarah Kliff who expanded on this point. One of the most obvious differences between pet insurance and human health care is end-of-life care. While health care costs for human patients are highly concentrated in the last years of life, pet health costs can be lower, due to additional options lime euthanasia.

From the Washington Post:

The one biggest difference, however, between pet health care and its human counterpart is likely end-of-life care. That tends to be one of the most expensive part of health insurance for humans, with 27 percent of Medicare dollars spent on the last year of life. Suffice it to say, end-of-life care for dogs comes with quite different options, including euthanasia.

There’s good news in Florida these days, and certainly something that gives Gov. Rick Scott some bragging rights. The state’s unemployment rate has dipped to 9%, which is a drop of 0.4 percentage points, the largest monthly decrease in almost twenty years. When Gov. Scott took office, the unemployment rate was nearly 12%. This is a major boost to Gov. Scott, who has been suffering from poor approval ratings essentially since he first took office. Scott has made job creation his top priority and even his campaign slogan was “Let’s Get To Work.”

Of course, 9% is still above the national average of roughly 8.2%, but Florida’s rate of decline in unemployment largely outpaces the nation’s. Many have dismissed Scott as a one-term governor due to his poor poll numbers, but I have always pointed to Charlie Crist’s sky high approval numbers this time four years ago as proof that political winds change on a whim. Four years ago, it was totally inconceivable that Crist would lose any race in 2010, and yet in less than a year his political fortunes made a drastic 180 degree turn. If Florida’s economic and unemployment figures continue to improve, Scott will be nearly impossible to defeat in 2014.

***

Speaking of elections, the Florida Senate race had a bit of a hiccup recently when it was revealed that Florida Chief Financial Officer Jeff Atwater was considering making a late entrance into the GOP Primary. The race for the GOP nomination currently pits Rep. Connie Mack IV (son of Florida’s popular former Sen. Connie Mack III and great-grandson of the legendary baseball manager Connie Mack) against former Sen. George LeMieux and retired Army Col. Mike McCalister running a distant third.

Polls show Mack handily winning the GOP nomination, but not fairing as well against incumbent Democratic Sen. Bill Nelson in the general election. Despite his decent poll numbers in the primary, however, it would appear that Mack has not been able to consolidate grassroots support or generate much energy for his campaign. George LeMieux, on the other hand, has been traveling the state and meeting with just about every Republican organization he possibly can. Despite his close ties to Republican pariah Charlie Crist, many in the grassroots and Tea Party circles are giving LeMieux a second look due to his strong ability to articulate conservative principles. Those against LeMieux, however, point to his years-long association with Charlie Crist, during which time he advised him on policy, politics, and later touted much of the governor’s liberal record. Those critical of Mack argue that he spends more time in California with his wife, Rep. Mary Bono, than he does in Florida.

Due to the apparent enthusiasm void for both these candidates, CFO Atwater toyed with the idea of jumping into the race, especially due to Florida law that does not require officeholders to resign if they run for a federal position. Tallahassee insiders all felt he would run, but he announced via Facebook several days later that he was going to focus on the job he was elected to do.

***

On a more serious note, Florida made a bit of history this week when its state-run property insurer, Citizens Property Insurance Corp., issued $750 million in catastrophe bonds. Nearly three times larger than originally planned, the purchase is said to be the largest of its kind and an important change in how Florida chooses to protect itself from damages that exceed its ability to pay.

If losses in Citizens’ coastal account exceed $6.35 billion at any point during the next two years, the bonds kick in. Proceeds not spent during the 2012 hurricane season would be available for the losses in 2013. This is certainly a step in the right direction because it shifts much of Florida’s hurricane risk away from taxpayers. Absent private reinsurance coverage and these other types of transactions, Floridians would be forced to pay massive assessments on their policies to cover any deficits Citizens Property Insurance Corp. or the state-run reinsurer known as the Florida Hurricane Catastrophe Fund might run following a bad hurricane season. The Citizens board deserves props for its decision to shift risk away from taxpayers and onto the private market, and legislators and others who say the private market does not have the will or ability to step in should take note.

Until next time!

It’s now official. Everglades Re Ltd., the first-ever catastrophe bond from Florida’s Citizens Property Insurance Corp., will go down as the largest single-tranche, single-peril cat bond in history, with a record offering size of $750 million.

The offering’s Class A notes have been rated B+ by rating agency Standard & Poor’s. The two-year notes would cover three-quarters of the $1 billion in private reinsurance Citizens projected it would obtain for the 2012 storm season, which starts June 1.

The bonds will pay a coupon to investors of 17.75% above U.S. Treasury money market fund rates, which is considered fairly generous, although perhaps necessary for a catastrophe-prone region like Florida. They will have an attachment point of $6.35 billion, which is a relatively high trigger, and become exhausted at $7.35 billion.

Citizens projects its probable maximum loss from a 10-year event is about $2.85 billion, so that would be below the cat bond trigger. A 25-year event carries a PML of $7.36 billion and the PML of a 100-year event is $21.4 billion.

Citizens originally anticipated it would spend $150 million on ceding to private reinsurers this year and $50 million for “alternative risk transfer” vehicles such as cat bonds. It also projects to spend $550 million on cessions to the Florida Hurricane Catastrophe Fund and to finish the year with $6.18 billion of surplus, up from $5.61 billion at year-end 2011.

The news of the cat bond’s successful placement certainly seems to amply demonstrate private sector interest in catastrophe risk, and it comes at a good time for Citizens, which is losing some of its power to lay “hurricane taxes” on the private market.  Earlier this year, the state Legislature passed H.B. 1127, which eliminates the regular assessment layers (which could be charged to virtually all property/casualty policies in the state in the event of a funding shortfall) that Citizens could charge on its commercial and personal lines accounts to cover, while reducing regular assessments on coastal accounts from 6% to 2% and lengthening the time frame private P&C insurers have to pay the assessments.

Citizens still has the ability to seek emergency assessments on both their own and other companies’ policyholders for up to 10% of annual premium.

Despite successful passage of H.B. 1127, the Legislature once again balked at taking more serious steps to scale back the risks posed both by Citizens and the Cat Fund. Perhaps somewhat ironically, the leadership of both institutions have been much more aggressive in sounding the alarm for reform than Florida lawmakers have been.

Most recently, Citizens announced it was examining whether 2009 legislation that limited annual rate increases to 10% should be considered to apply to new policies.  They are considering a proposal to lift the rate increase cap for new policies, which they hope will both speed along depopulation efforts and help bring Citizens’ overall risk profile closer to being actuarially sound.  Estimates of rate adequacy from Citizens’ actuarial staff showed that both personal lines and commercial residential rates are currently short by 42.3%, while commercial nonresidential rates are 75% below the actuarially indicated levels.

As of March 31, Citizens had 1.4 million policies in force with total exposure of $502.98 billion. Despite ongoing efforts to depopulate Citizens through transfers of blocks of policies to the market, in December, the company projected its policy count would rise 11.5% this year and finish the year at about 1.7 million.

This week, The Heartland Institute and a number of other organizations will engage in a “Flood the Hill” campaign to make a final push to convince the Senate to pass a flood insurance reform bill. Although this wouldn’t be “the last step” —the bill would still need to go to conference and be signed by President Barack Obama —the House and Senate bills are close enough to one another and administration policy that both conference and signature will happen if the Senate passes a bill.

The stakes are pretty high: If the National Flood Insurance Program doesn’t get renewed by the end of May, it’s quite possible it won’t get renewed this year at all. And then the House and Senate will have to start all over. And Congress will have wasted a golden opportunity to get things right at long last. The big problem: FEMA, as OOTS editor R.J. Lehmann has reported, has “gone rogue” and called for a “clean” two-year extension that will not make any real reforms.

This would be a huge mistake. The bills currently before the House and Senate are both fiscally and environmentally responsible. On the fiscal side, both bills raise rates on properties that have been subsidized for decades, while simultaneously improving maps to make sure that rates are determined correctly in the first place. Likewise, the possibility of private risk transfer for a portion of the flood insurance program’s liability will begin to open up the possibility of private flood insurance. Environmentally, the higher rates will discourage construction in places where it should not happen and new maps will make it easier to preserve nature.

All in all, the bill is a winner. To my knowledge, no interest group besides FEMA itself dislikes them. So why the delay?  On that front, I’ve heard three theories,  all of which may be true.

First, Senate Banking Committee Chairman Tim Johnson, D-S.D., generally one of the more free-market members of his caucus, simply isn’t being enthusiastic or energetic enough in moving the bill forward. A few pretty well-placed people have told me this and I give it some credence.

Second, the administration (despite stated policy to the contrary) doesn’t really want the bill because it is going to make some people angry. Some people (most of them well-connected and well-off) are going to pay much higher premiums after the bill passes. While better maps may reduce premiums or end mandatory purchase requirements for many, this isn’t going to win votes, while higher premiums could lose them.

Third, some agents groups (although not the National Association of Professional Insurance Agents, which is actually very much in favor of the bill) are secretly opposing the bill because it doesn’t really provide things agents want, like business interruption and finished basement coverage.

All of this is just theoretical right now. I don’t know how or why the bill isn’t moving forward; it could just be Washington inertia and the press of other things to do. But flood insurance reform must move forward now.

***

In the next few months, Heartland and some of its other partners are going to be working on efforts to reform the Price-Anderson Act. We’re just in the process of starting meetings and deciding on the route we’ll take but, whatever happens, it’s clear we’ll be working to privatize significantly more nuclear industry liability than is private today.

I say this as a fan of nuclear power: with proper safeguards, it’s safe, essentially pollution-free and, whatever the downside, is better than burning the coal we use to generate most electricity. Like any other form of energy, however, nuclear power should sink or swim on the basis of market forces rather than ideology or affection for one type of energy generation over another.

***

A Senate vote on the Small Business Lending Enhancement Act, sponsored by Sen. Mark Udall, D-Colo., could take place in the very near future. The bill deserves speedy Senate passage: it’s a commonsense deregulatory measure Republicans need to support in greater numbers than they have.

The Mississippi Windstorm Underwriting Association, the state’s coastal wind pool, has bought $815 million of reinsurance  coverage for the 2012 storm season, The Mississippi Press is reporting.

The total matches last year’s reinsurance package, for which the MWUA paid $69 million. The association isn’t providing an exact dollar figure for its 2012 package, reporting only that it paid between $65 million and $75 million. In 2010, the MWUA paid $69 million for $750 million of coverage, the Press reported.

The 25-year-old MWUA provides hail and windstorm coverage to 41,000 policyholders in Mississippi’s coastal George, Hancock, Harrison, Jackson, Pearl River and Stone counties.  The association, which has not raised wind pool rates since 2006, is retaining $71.5 million of risk this year, up from $51.5 million in 2011.

Insurance Journal quoted Julie Drenner, Texas director for The Heartland Institute’s Center on Finance, Insurance and Real Estate, in a piece on proposed rate hikes set to be considered by the Texas Windstorm Insurance Association.

As we reported here in Drenner’s April 25 Letter from Austin piece, TWIA’s board of directors has received a recommendation from its actuarial committee for a 4.7% overall rate increase, as well as for initiating a process to more closely tie rates to territorial risks. The state-run insurer is bound by statute from charging policyholders premium rates that vary by more than 8% for the same coverage.

TWIA currently writes roughly 57% of the windstorm coverage in Texas’ 14 “Tier 1” coastal counties, up from 17.9% in 2000. The Texas Department of Insurance, which placed TWIA under administrative oversight early last year, would still have to approve any rate increases before TWIA could implement them. Earlier this year, Texas Insurance Commissioner Eleanor Kitzman put forth a proposal to hire consultants to reduce the state-backed insurer’s exposure and improve service to policyholders.

According to Insurance Journal, TDI would like to see TWIA’s policy applications updated to include questions gathering “information about any additional insurance and limits for the applicant’s property; information about the property’s flood carrier and flood insurance limits; and for renewal applications, to determine whether any new structures have been added to the property during the policy year.” The magazine reports:

The Heartland Institute, a free-market think tank, has called on the TWIA board to adopt the actuarial committee’s proposal regarding the rate increase. The Institute noted that an actuarial analysis conducted on TWIA’s behalf by Merlinos and Associates found that if the state-run insurer doesn’t raise rates, there is a 27 percent chance it would not be able to cover all of its liabilities during the 2012 hurricane season.

“Originally an insurer-of-last-resort, TWIA has seen its market share in the 14 coastal counties jump from less than 20 percent to nearly 60 percent over the past decade. Risk-based rates are an essential first step to bring down the rolls of TWIA policyholders and to protect taxpayers from the consequences of a TWIA shortfall,” stated Julie Drenner, Texas director of The Heartland Institute.

A plan for Oklahoma to join Texas as the only two states in the nation without a mandatory workers’ compensation system has hit a major snag, as the bill went down to defeat in the state House of Representatives.

Sponsored by Rep. Fred Jordan, R-Jenks, H.B. 2155 would exempt certain employers who offer a full package of injury, disability and death benefits from compliance with Oklahoma’s Workers’ Compensation Code. A floor vote on the measure failed by a 42-50 tally.

Following the floor vote, Jordan – who serves as both assistant majority whip of the Oklahoma House and chair of the Judiciary Committee – held the measure for reconsideration, which would allow it to be returned for a second vote.

A similar measure, S.B. 1378, previously passed the Oklahoma Senate by a 27-17 tally on March 14.

The issue of extending and reforming the National Flood Insurance Program continues to stall in Congress. While the U.S. House version of a reauthorization bill passed in July 2011 by a significant margin, the bill has yet to get a floor vote in the U.S. Senate.

Sen. David Vitter, R-La., sponsor of a five-year extension of the NFIP, renewed is renewing the push, arguing in a speech on the Senate floor that relying on short-term extensions is poor way to manage what is an important program. Out of the Storm News covered the short term extensions in a story yesterday.

From The Advocate:

Vitter said he is concerned Congress could cause a repeat of 2010, when the program lapsed multiple times for a total of 53 days.

“This is an important program for the country,” Vitter said. “The clock is ticking and that clock runs out May 31.”

Congress has sustained the flood insurance program by approving six-month extensions. Vitter also has now introduced a backup bill for another extension through December if he cannot get his legislation heard on the floor.

Sen. Vitter argued that allowing the program to expire could have the effect of further stalling the housing market. Since federally related mortgages require flood coverage, many deals could not be closed when NFIP coverage is not available.

The program allows homeowners and businesses in flood zones that have trouble getting private insurance to obtain policies backed by the federal government.

About 500,000 people in Louisiana participate. The program has been in financial distress with a loss of $18 billion, mostly due to payments made after hurricanes Katrina and Rita in 2005.

If the program lapses, current insurance policies remain in effect but applications cannot move forward.

Vitter said many real estate closings “came to a screeching halt” in 2010 when the program lapsed.

Vitter’s believes the real obstacle to the bill’s passage is simply getting it introduced on the floor. Along with 41 co-signers, Vitters urged Senate leaders to consider the bill in a letter sent in February. He placed much of the blame for the delays on the Senators themselves and their “inability to, frankly, get our act together” in the Senate.

The U.S. House approved its version of reauthorization legislation in July on a 406-22 vote.

Vitter’s five-year reauthorization legislation was approved by the Senate Banking Committee in September.

“We need to get it on the Senate floor, pass it out of here and reconcile it with the House bill,” Vitter said Thursday. “Really, the only issue is getting time on the Senate floor.”