Senate agreed Tuesday to write off — and hand over to taxpayers — more than $17 billion in debt that a FEMA flood insurance program accumulated after being devastated by Katrina and other 2005 hurricanes.

The bill to extend the National Flood Insurance Program for five years also includes measures, such as increasing premiums and reducing subsidies, aimed at putting the 40-year-old program on a better financial footing.

The 92-6 vote sends the bill to negotiations with the House, which passed similar legislation last September. With the 2008 hurricane season officially starting on June 1, there’s motivation to move quickly to resolve differences and get the bill to the president’s desk.

The highlight of the Senate bill is the forgiving of some $17.5 billion in debt that the Federal Emergency Management Agency, which runs the program, owes the Treasury. That action adds to what taxpayers owe in terms of the federal debt.

Lawmakers from both parties were in agreement that this was necessary considering the exceptional circumstances resulting from Katrina. Senate Banking Committee Chairman Christopher Dodd, D-Conn., said that FEMA would be forced to raise premiums to the 5.5 million policyholders if it were forced to continue paying interest on the debt to the Treasury.

The flood program was created to help homeowners and businesses situated in flood-prone regions get affordable insurance not usually available from the private insurance market.

The House bill differs from the Senate legislation in extending the program to cover wind damage. There were widespread complaints after Katrina that private insurers with wind coverage were judging damage from the hurricanes to be the result of flood, rather than wind, so as to shift the burden of compensation to the federal program.

The White House said that any bill including wind coverage would face a presidential veto, saying that “shifting liabilities for windstorm damage from the private sector to the NFIP would be fiscally irresponsible.”

Sen. Roger Wicker, R-Miss., with Louisiana senators, offered an amendment to the Senate bill that would have provided optional wind coverage, but it was defeated 73-19. Wicker said he would continue to push for the change: “The status quo is not working and the federal government must act now to fix this inequity.”

Sen. Mary Landrieu, D-La., won acceptance of a provision to expand the functions of the program’s customer service office to investigate potential instances of fraud and abuse and ensure that private insurers are acting in good faith.

The Senate bill also:

— Requires people protected by dams or levees to buy flood insurance after floodplain mapping is completed.

— Allows FEMA to raise rates by 15 percent annually, up from 10 percent, and increases minimum deductibles.

— Gradually ends subsidies now available to some second homes, commercial properties and properties that experience repeated losses.

— Requires FEMA to adjust rates to accurately reflect risk upon completion of flood insurance rate maps.

The bill is HR. 3121.

On the Net:

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