Senators Hillary Clinton, D-N.Y., and Bill Nelson, D-Fla., have introduced the Homeowners’ Defense Act of 2007 to address the growing problem of the availability and affordability of natural disaster insurance, a proposal the Independent Insurance Agents & Brokers of America (the Big “I”) is applauding.
The legislation is a companion to H.R. 3355, introduced earlier this year by Reps. Ron Klein, D-Fla, and Tim Mahoney, D-Fla. The proposal contains two titles, one to create a National Catastrophe Risk Consortium and one to create a National Homeowners Insurance Stabilization Program. Both programs are intended to help prevent potential insolvencies and make the private insurance market more stable, ultimately making catastrophe insurance more available before and after a major disaster, the Big “I” said.
The Consortium program would allow multiple states to pool their catastrophic risk in hopes of achieving an economy of scale and risk diversity that will lead to a lower cost of reinsurance than states could achieve independently.
The Stabilization program would allow the Treasury Department to make loans to states and their reinsurance plans to ensure their continued liquidity in the aftermath of a natural catastrophe.
“Natural disaster risk requires a national solution, and we applaud the Senators for advancing a proposal to attempt to solve this problem. Introduction of this legislation in the Senate, coupled with expected House action on the issue this week, is focusing attention on the severity of the problem.,” said Charles E. Symington Jr., Big “I” senior vice president of government affairs and federal relations.
“The creation of a National Catastrophe Risk Consortium could offer both states and private market participants an opportunity to benefit from a pooling of catastrophic risk diversified by type of peril and geographic region. The creation of a National Homeowners’ Insurance Stabilization Program, meanwhile, could provide for a level of stability for state and regional reinsurance programs that is currently absent,” added John Prible, Big “I” assistant vice president for federal government affairs.
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