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The federal government must help stabilize homeowners’ markets challenged by natural catastrophes, said U.S. Rep. Tim Mahoney, D-Fla., at a National Conference of Insurance Legislators meeting in Washington, DC.
Outlining one of several possible options being explored by NCOIL as a way to address the natural catastrophe crisis, Mahoney said the Homeowners’ Defense Act of 2007 (H.R. 3355), is the right approach—and perhaps the best hope for struggling consumers.
Mahoney, who co-sponsors the legislation with fellow freshman, Rep. Ron Klein, D-Fla., said during his Feb. 28 keynote address that “there just isn’t enough money in the kitty.” Private insurance markets and state mechanisms would be ill-prepared in the face of a true mega-catastrophe, he added.
The consequences of state and/or regional shortfalls would be felt nationwide, Mahoney said, citing the oil-market instability following Hurricanes Katrina and Rita.
Mahoney attributed at least some of the success of the Homeowners’ Defense Act to timing.
“If you get behind an issue and the issue has national momentum, and you get the right people, you can change the world,” he said.
Citing availability and affordability problems in his home state, Mahoney said the hurricane risk besieging Florida is not the only peril H.R. 3355 contemplates. Tornadoes in the Midwest and earthquakes along the New Madrid fault line, are just two of the many other hazards that threaten to bring potentially large-scale insured losses, he said.
The Homeowners’ Defense Act, which passed the House of Representatives on Nov. 7, 2007, would establish a national catastrophe risk consortium to help states access capital markets and would provide for low-interest loans to help buoy state reinsurance funds. The bill would allow the Treasury Department to sell reinsurance to state reinsurance funds under certain conditions—including that the federal government could be on the hook for no more than $200 billion in aggregate liability for any year.
Mahoney’s remarks were the latest NCOIL initiative regarding catastrophe readiness. Others include support for federal tax-deferred catastrophe reserves, statewide building codes, thoughtful land use strategies, and state catastrophe funds as appropriate.
Source:National Conference of Insurance Legislators