WASHINGTON, D.C., May 21, 2009—Rep. Ron Klein (D-Fla.) today introduced H.R. 2555, the Homeowners’ Defense Act. The legislation addresses the growing problem of natural disasters.
“Natural disasters require a national solution and the introduction of the Klein bill is a good first step towards a comprehensive solution,” says Charles E. Symington, Jr., Big “I” senior vice president of government affairs. “We applaud the Congressman for working to get this introduced in the House.”
The bill contains four main provisions and creates the following:
1. National Catastrophe Risk Consortium
2. Catastrophe Obligation Guarantee Program
3. Federal Natural Catastrophe Reinsurance Fund
4. Mitigation Grant Program
Each program is intended to help prevent potential insolvencies and to make the private insurance market more stable, ultimately making catastrophe insurance more available before and after a major disaster.
The National Catastrophe Risk Consortium program would allow multiple states to pool their catastrophic risk, with the goal of achieving an economy of scale and risk diversity that will lead to a lower cost of reinsurance than states could achieve independently. The Catastrophe Obligation Guarantee Program would authorize the federal government to guarantee debt issued by eligible state catastrophe programs to assist in the financial recovery from natural catastrophes. The Federal Reinsurance Fund would allow the Treasury Department to write reinsurance contracts covering truly catastrophic–level events. Finally, the Mitigation Grant Program would establish a grant program in the Treasury Department to develop, enhance, and maintain programs that prevent and mitigate losses from natural catastrophes.
The Big “I” supports the goals of each of these programs, but also encourages Congress to consider making changes to the Reinsurance title of the legislation in particular.
“While the Big “I” appreciates Congress’ consideration of a national reinsurance backstop for natural disaster insurance, we feel that such a backstop would better encourage private market participation in problematic markets if it allowed private market participation instead of just state catastrophe funds,” continued Symington. “We will continue to advocate that Congress consider a solution utilizing the private markets instead of merely state catastrophe funds.”
The Big “I” has been a leader in advocating for natural disaster solutions, testifying on several occasions before the House Financial Services Committee and the Senate Banking Committee on the need for Congress to consider legislation to stabilize the insurance market for natural disaster risk.
“As the representatives of the independent insurance agents who sell homeowners’ insurance, we feel it is important that Congress encourages both a healthy and vibrant private market as well as secure state and regional reinsurance programs,” says John Prible, Big “I” assistant vice president for federal government affairs. “Specifically, 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 Catastrophe Obligation Guarantee Program, meanwhile, could provide for a level of stability for state and regional reinsurance programs that is absent at this time.“
Founded in 1896, IIABA (the Big “I”) is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life, and health—as well as employee benefit plans and retirement products. Web address: www.independentagent.com.