Three elected representatives from New York joined with a leading homeowner’s insurance company last week in a call for increased government involvement in providing reinsurance for catastrophes.
Congressman Steve Israel (D-N.Y. 02), Congresswoman Carolyn McCarthy (D-N.Y. 4th), both members of the House Financial Services Committee, joined State Senator Mike Balboni (R-East Williston) and a representative from Allstate in urging the federal government to create a nationwide federal disaster reinsurance fund.
Israel and McCarthy are co-sponsoring The Homeowner’s Insurance Protection Act of 2005, a bill to create a federal reinsurance catastrophic fund as a federal backstop for future natural disasters. It also encourages states to create catastrophic funds by providing a federal backstop for those that do so.
Balboni has introduced legislation that creates a state catastrophe fund in New York.
The federal fund, named the Consumer Hurricane and Earthquake Protection Fund, or HELP Fund, would be housed in the Department of the Treasury and provide lower-cost reinsurance to state cat funds, thus, sponsors say, reducing the costs of homeowners’ insurance to those around the country.
Under the bill, should a 1 in 50 year natural disaster event strike a state,the federal catastrophe fund would provide coverage up to a 1 in 500 year event.
The legislators warned that since homeowner’s insurance is required to get a mortgage, increased insurance prices could create an additional barrier to homeownership in the state’s already expensive housing market.
“High property values and replacement costs break the back of the insurance system each time the United States is hit with a major catastrophe,” said 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 said government should act now before it is too late. “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.”
McCarthy urged lawmakers to learn from previous expereince. “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. “
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