WASHINGTON, D.C., March 10, 2010—The Big “I” today commended the U.S. House of Representatives Committee on House Financial Services Subcommittee on Housing and Community Opportunity and the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises for holding a joint hearing titled “Approaches to Mitigating and Managing Natural Catastrophe Risk: H.R. 2555, The Homeowners’ Defense Act.”
The Homeowners’ Defense Act was introduced last year by Reps. Ron Klein (D-Fla.) and Bill Posey (R-Fla.) in an attempt to address growing concerns regarding the affordability and availability of natural disaster insurance. The Big “I” submitted testimony in today’s hearing in support of Congress finding a solution to the rising prices and continued lack of availability for both homeowners’ and commercial insurance in some parts of the country due to the continued threat of natural disasters.
“The lack of affordable natural disaster insurance in many parts of the country requires Congressional action, and the consideration of H.R. 2555 is a good first step towards solving this national problem,” says Charles E. Symington, Jr., Big “I” senior vice president of government affairs. “We applaud the House Financial Services Subcommittees for holding this important hearing and exploring potential solutions.”
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 the inclusion of a national reinsurance backstop in the Homeowners’ Defense Act, such a backstop would better encourage private market participation in problematic markets if it called for private insurer access instead of just state catastrophe funds,” continues 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” 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, 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, health, employee benefit plans and retirement products. Web address: www.independentagent.com.