Congressman Steve Israel (D-NY 02), Congresswoman Carolyn McCarthy (D-NY 4th), members of the House Financial Services
Committee, joined State Senator Mike Balboni (R-7th) and a representative from Allstate on Friday in calling on the federal government to create a nationwide federal reinsurance fund for catastrophic insurance.
Homeowner’s insurance is required to get a mortgage, and increased prices could create an additional barrier to homeownership that our already expensive housing market can not bear.
“If we can take any lesson from Hurricane Katrina, it’s that we can’t
control Mother Nature, but we can control our response to natural
disasters,” Israel said. “Even though it’s been almost 70 years since a
major hurricane has hit Long Island, meteorologists say we could see one again. As it stands, Long Island homeowners are stuck with insurance industry decisions to stop issuing policies in areas that are at high risk of a natural disaster. That’s why we need the federal government to create a nationwide federal reinsurance fund for catastrophic insurance. This is a roof we need to fix while the sun is shining.”
According to McCarthy, “Congress must act to ensure that Long Island’s homeowners can receive coverage should the worst occur. The State of Florida experienced a similar challenge following Hurricane Andrew in 1992. Florida created reinsurance pools to better spread the risk from a future natural disaster and ensure coverage for homeowners. It is time for Congress to pass similar legislation that will give insurance companies incentive to continue offering affordable coverage to homeowners in high-risk areas. “
“High property values and replacement costs break the back of the insurance system each time the United States is hit with a major catastrophe,” added State Senator Michael Balboni (R-East Williston). “Creation of a nationwide federal reinsurance fund will act as a backstop to strengthen the weaknesses of the current system and ensure that homeowners and would-be-homeowners have access to adequate insurance coverage.”
Israel and McCarthy are co-sponsoring The Homeowner’s Insurance Protection Act of 2005, a comprehensive catastrophic insurance bill that reduces homeowners’ insurance costs to American families and ensures liquidity in the insurance market.
The legislation establishes a federal reinsurance catastrophic fund (cat fund) as a federal backstop for future natural disasters. It also encourages states to create catastrophic funds by providing a federal backstop for those who do so. Senator Balboni has introduced legislation that creates a state catastrophe fund in New York.
The federal fund, which will be named the Consumer Hurricane and Earthquake Protection Fund, or HELP Fund, will be housed in the Department of the Treasury and will provide lower-cost reinsurance to state cat funds, thus reducing the costs of homeowners’ insurance to those around the country.
Under the bill, should a 1:50 year natural disaster event strike a state,
the federal catastrophe fund would provide coverage up to a 1:500 year
Creating a federal backstop reportedly creates an alternative market for primary insurers to purchase reinsurance, and reduces the costs of property and casualty coverage for homeowners.
In addition, a federal backstop will allow the insurance industry to remain solvent in the event of a mega-catastrophe, such as a category four hurricane or major earthquake.
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