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This draft bill would authorize insurance to be made available for homes, for business and farm properties, and for agricultural commodities. It would also establish a maximum amount of insurance for any one person or business of $250,000. While this would not cover some of the large losses in a flood, it would take care of the homeowners, businessmen, and farmers who are least able to afford flood losses because their total assets are small. As experience is gained,

it may be desirable to change this maximum amount.

Furthermore, the bill would limit the insurance payment on any given property to 90 percent or less of the loss sustained. Such a limitation will preserve the incentive for the property owner to do what he can to protect his own property.

I believe that this flood-insurance program should be set up on a basis that is designed to permit the Government to break even. To do so, it will be necessary that rates be set high enough to cover all expenses, including a proper reserve for losses.

However, since there is only limited experience upon which to rely in determining such rates, it will be necessary to start the program on an experimental basis, both with respect to rates and areas covered. Accordingly, the draft legislation provides for limitations on the total amount of insurance to be written in each of the first 3 years, and for a report to the Congress by the Corporation before the end of that period, making recommendations concerning the nature and extent of the program thereafter.

In addition, the draft legislation authorizes Federal agencies that make or guarantee loans to require borrowers to purchase flood insurance where it is available. Thus the Reconstruction Finance Corporation, for example, might require its borrowers to carry flood insurance, where appropriate, just as it now requires them to carry fire insurance.

All in all, I believe this draft legislation represents a sound and workable approach, and I heartily recommend it to the consideration of the Congress. I strongly believe that legislation along these lines is most urgently needed. There is no reason whatever for continuing to rely on inadequate and emergency relief programs to take care of the thousands of people every year who suffer extensive flood damage to their homes and farms and businesses.

We can and we should provide a businesslike system of insurance to finance the restoration of such losses. I hope the Congress will enact such a system without delay.

THE WHITE HOUSE, May 5, 1952.


A BILL To provide for National Flood Insurance, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "National Flood Insurance Act of 1952".


SEC. 2. It is the purpose of this Act to promote the national welfare by alleviat ing the widespread economic distress suffered from time to time within the United States, its Territories and possessions as a result of floods, and the attendant impairment of the free flow of interstate and foreign trade and commerce, by providing direct governmental insurance against certain flood risks or by making insurance against such risks available through private insurance companies by means of governmental reinsurance.


SEC. 3. (a) To carry out the purposes of this Act, the Reconstruction Finance Corporation (hereinafter referred to as "the Corporation") is authorized to provide either insurance or reinsurance, or both insurance and reinsurance, against loss resulting from damage to or loss of real or personal property (including agricultural commodities, and property owned by the State or local governments) due to flood as defined by the Corporation occurring within the limits of the United States, its Territories, and possessions: Provided, That no insurance or reinsurance shall be issued for losses resulting from (A) any hostile or warlike action by (i) any government or sovereign power (de jure or de facto) or any authority maintaining or using military, naval, or air forces, or

(ii) an agent of any such government, power, or forces, or (B) any action taken by any Federal, State, or local government agency in hindering, combating, or defending against any such hostile or warlike action (whether acutal, impending, or expected), or (C) disorder or other lawlessness accompanying the collapse of civil authority determined by the President to have resulted from any action referred to in clause (A) or (B) or from control by enemy forces.

(b) The Corporation shall from time to time prescribe (1) premium rates for each type of insurance and/or reinsurance which it shall make available under authority of this Act, and (2) the terms and conditions under which and the areas and subdivisions thereof within which each rate shall be applicable. All such rates shall be based upon consideration of the risks involved and shall be adequate, in the judgment of the Corporation, to cover all administrative and operating expenses arising under this Act, as well as reserves for probable losses. The Corporation may receive from or exchange with any State or territorial insurance commission or agency or with any private corporation or association engaged in the writing of insurance against property loss within the United States such loss experience information as may be necessary for the establishment of such premium rates.

(c) The Corporation shall by regulation provide for the determination of (1) the types and location of property with respect to which insurance and/or reinsurance shall be granted, (2) the nature and limits of loss or damage in any area or subdivisions thereof which may be covered by such insurance or reinsurance, (3) rates, terms, and conditions of such insurance or reinsurance, and (4) such other matters as may be necessary to carry out the purposes of this Act. The Corporation may decline such applications and risks and may establish from time to time such regulations with respect to the classification, limitation, and rejection of risks as it shall deem advisable for the purposes of this Act.

(d) In providing insurance and/or reinsurance, the Corporation may by contract arrange for the financial participation of private insurance companies or other insurers in the underwriting of risks assumed, and for their proportionate participation in premiums and in any profits or losses realized or sustained. The Corporation shall utilize the facilities and services of other public agencies, of private insurance companies, and of established insurance agents and brokers and established insurance adjustment organizations to the maximum extent which the Corporation shall deem practicable and consistent with minimum cost of providing insurance protection.

(e) The aggregate amount of insurance issued by the Corporation in favor of any person or State or local government shall not exceed $250,000. No claim shall be approved in an aggregate amount which exceeds the actual cash value or the cost of replacing, repairing, or rebuilding the damaged property with material of like kind and quality (less depreciation at the time of damage) whichever is lower: Provided, That the approved amount of any claim shall be reduced by $300 plus 10 per centum of the remainder, or by such larger amount or percentage as may be prescribed by the Corporation in the insurance contract. The Corporation shall prescribe such regulations applicable to reinsurance as it may deem appropriate to give effect to the intent of the limitations in this subsection. The Corporation may from time to time prescribe such regulations regarding coverage available to subsidiary and affiliated corporations as it shall deem appropriate to effectuate the purpose of this subsection.

(f) The Corporation, on and after the first day of the sixth month following the enactment of this Act, may provide insurance or reinsurance in an aggregate amount not to exceed $500,000,000 outstanding and in force at any one time, which limit may be increased, with the approval of the President, by further amounts of $500,000,000 each on July 1, 1953, and July 1, 1954.


SEC. 4. (a) In carrying out the functions authorized in this Act, the Corporation shall consult with other agencies of the Federal Government and interstate, State, and local agencies having responsibilities for flood control and flood damage prevention in order to assure that the insurance facilities offered are consistent with the programs of such agencies.

(b) No insurance or reinsurance shall be issued (1) for risks eligible for insurance provided by other Federal programs, or to the extent that coverage is available on reasonable terms from other private or public sources, or (2) for properties whose use is in conflict with State or local flood zoning laws.

(c) Any department or agency of the Federal Government engaged in making direct loans or advances, or in participating in, insuring or guaranteeing loans made by private lending institutions, for the construction, modernization, repair, or purchase of property eligible for insurance under this Act may require as a condition for such future financial assistance that such property be insured against flood damage to the extent such insurance is available.


SEC. 5. (a) To carry out the functions authorized by this Act, there is authorized to be established in the Treasury of the United States a National Flood Insurance Fund (refererd to hereinafter as the "fund"). The capital of the funds shall consist of such amounts as may be advanced to it from appropriations. Such sums as may be required are authorized to be appropriated without fiscal year limitations for the purposes of the fund.

(b) Advances shall be made to the fund from the appropriations made therefor when requested by the Corporation. The Corporation shall pay into miscellaneous receipts of the Treasury at the close of each fiscal year, interest on such advances at a rate determined by the Secretary of the Treasury, taking into consideration the average rate on outstanding interest-bearing marketable public debt obligations of the United States.

(c) Premiums paid to the Corporation for insurance and reinsurance under this Act, interest earned on investments of the fund, and receipts from any other operations under this Act shall be credited to the fund. The fund shall be available for the payment of liabilities under such insurance and reinsurance and for payment of all expenses of the Corporation under this Act.

(d) Whenever any capital in the fund is determined by the Corporation to be in excess of its current needs, such capital shall be credited to the appropriation from which advanced where it shall be held for future advances. After liquidation of all outstanding advances, any cash in excess of current needs may be invested or reinvested by the Corporation in interest-bearing obligations of the United States or in obligations guaranteed as to interest and principal by the United States. The proceeds from the sale or redemption of the obligations held by the Corporation pursuant to this Act shall be credited to the fund.


SEC. 6. (a) The Corporation (1) shall appoint an advisory committee, consisting of not less than three individuals experienced in the writing of insurance against property loss, to advise the Corporation with respect to the execution of its functions pursuant to this Act, and (2) may also employ such part-time consultants and advisory personnel as the Corporation may deem necessary in carrying out the purposes of this Act. Persons so employed who, while so serving, hold other offices or positions under the United States shall receive no additional compensation for such service. Other persons required under the provisions of this subsection may be employed as authorized in section 15 of the Act of August 2, 1946 (5 U. S. C. 55a), but at rates for individuals not in excess of $50 per diem.

(b) In order to carry out the purposes of this Act, the Corporation is hereby authorized, subject to the procedures prescribed by section 505 of the Classifi cation Act of 1949, to place not more than five positions in grade 16, 17, or 18 of the general schedule established by said Act, and such positions shall be in addition to the number authorized by said section.


SEC. 7. (a) Under such regulations as the Corporation may prescribe, it shall adjust and pay valid claims either directly or through agents for losses covered by insurance and reinsurance under this Act. The Corporation shall collect from participating insurance companies such amounts as they may be obligated to contribute toward such losses.

(b) Upon disallowance of any claim against the Corporation or upon refusal of a claimant to accept the amount allowed by the Corporation, the claimant, within one year after the date of mailing notice of disallowance or partial disallowance by the Corporation, may institute an action against the Corporation on such claim in the United States district court for any district in which the in

sured property or a part thereof is situated. Exclusive jurisdiction is hereby conferred upon such courts, sitting without juries, to hear and determine such actions without regard to the amount in controversy.


SEC. 8. (a) The Corporation shall make a comprehensive annual report of its operations under this Act for the fiscal year ending on the preceding June 30 to the Congress as soon as practicable in each year, but in no case later than the third day of the following January.

(b) The Corporation shall make a study and investigation of (1) the work, activities, personnel, and functions authorized under this Act, for the period from the enactment of the Act to June 30, 1954, and (2) the practicability of providing insurance or reinsurance for loss resulting from business interruption due to floods. It shall report to the Congress the result of the study and investigation, and make such recommendations as it may deem appropriate, on or before January 3, 1955.


SEC. 9. The powers, functions, duties, and authority arising under this Act shall be exercised and performed by the Reconstruction Finance Corporation while that Corporation has succession, and thereafter by such officer, agency, or instrumentality of the United States as the President may designate: Provided, That for the purposes of carrying out this Act by any such officer, agency, or instrumentality the authority granted to the Reconstruction Finance Corporation in section 3 of the Act of January 22, 1932, as amended (15 U. S. C. 603), shall be available to such officer, agency, or instrumentality, notwithstanding dissolution of the Reconstruction Finance Corporation.

Senator GREEN. As I said before, that message with the enabling legislation was referred to committees in both Senate and House, and they never reported.

Governor ROBERTS. Senator, if I may, I would like to introduce for the purpose of putting into the record these photographs of the damage in the Woonsocket area. I think they would be very informative to anybody who had an opportunity of seeing them.

This one indicates the flood in the social area of Woonsocket, and you can clearly see it is a residential area and an industrial area, and the damage it has inflicted is great.

If I may, Senator, I would like to introuce into the record these three photographs.

Senator LEHMAN. They will be introduced in the record, there being no objection. Have they received wide publicity?

Governor ROBERTS. Yes; they have.

Senator LEHMAN. They are very interesting and moving.

Thank you again.

Governor ROBERTS. Thank you.

(The photographs referred to will be found in the files of the committee.)

Senator LEHMAN. The next witness has a statement to present. Mr. George A. Bisson, commissioner of insurance of the State of Rhode Island.

Commissioner Bisson.


Mr. BISSON. Senator, for the record I would like to read this prepared statement if I may.

69096-56-pt. 1—39

On November 4, 1955, Hon. C. Lawrence C. Leggett, president of the National Association of Insurance Commissioners, appointed a special committee designated as flood and hurricane committee. The members serving on this committee are: George A. Bisson, Rhode Island, chairman; Leffert Holz, New York, vice chairman; F. Britton McConnell, California; Charles F. Gold, North Carolina; Arch E. Northington, Tennessee; and Mark Wentz, Texas.

The National Association of Insurance Commissioners will meet in New York at their regular semiannual meeting from November 28 to December 2, 1955, and at that time there is scheduled on the agenda a meeting of the flood and hurricane committee at which all segments of the insurance industry-stock insurance companies, mutual insurance companies, reciprocal exchanges, etc., will be present.

The purpose of the meeting is to make available the full facilities of the insurance companies, their producers, and the Insurance Commissioners to the Federal Government and the several States and to cooperate should Congress and/or the several States see fit to enact a program of flood insurance.

Senator LEHMAN. Thank you very much.

I want to let you know at the hearing we had in Goshen, N. Y., last week Commissioner Holz read substantially the same statement. Mr. BISSON. Thank you.

Senator LEHMAN. The next witness who is listed is Mayor Reynolds, of Providence.


Mayor REYNOLDS. Senator Lehman, Senator Green, Congressman Fogarty, Congressman Forand, and Governor Roberts, I am extremely pleased to have this opportunity to present my views to the Senate Committee on Banking and Currency relative to the subject of flood insurance.

I have no specific proposals to offer this committee with respect to how such insurance should be written. I believe that I am very clearly in a position to demonstrate the need for such insurance.

During the summer of 1954 the city of Providence was visited by the hurricane known as Carol and was very nearly visited by hurricanes Edna and Hazel. The damages caused by hurricane Carol in Providence were probably the heaviest experienced in New England, at least up to that time. Commercial losses alone were estimated at $40 million.

Telephone service was seriously disrupted, and electrical power in the city was almost completely shut off, causing large quantities of foods to spoil from lack of refrigeration.

With 4 to 5 feet of water in downtown Providence, thousands of parked automobiles were submerged, and it is estimated that at least five thousand such automobiles were rendered completely useless.

Damages to industrial plants and equipment were also extremely heavy, and were estimated at more than $10 million. Producing chemical plants lost much of their stockpiled materials from flooding, and manufacturers of jewelry and machinery suffered severe corrosive damage to machines, equipment, and finished products.

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