The Independent Insurance Agents of America (IIAA) is endorsing a just-introduced House bill that would increase availability and affordability of homeowners insurance in disaster-prone areas, according to the group’s Senior Vice President of Federal Government Affairs Maria L. Berthoud. Rep. Dave Weldon (R-Fla.), a leading member of the Financial Services Committeewhich has House jurisdiction over insurance issues, offered the Homeowners Insurance Availability Act (H.R. 4025) recently. Reps. Chris John (D-La.) and Robert Matsui (D-Calif.) are the lead cosponsors. The measure has been referred to the Financial Services Committee for consideration.
Similar to a bill offered in past Congresses, H.R. 4025 proposes to establish a federal program that will provide reinsurance to state residual market plans and insurance companies. The federal backstop would result in improved availability and affordability of homeowners insurance in coastal areas endangered by hurricanes and communities threatened by earthquakes, areas where many insurers do not offer policies anymore.
“For many agents and homeowners, too often there is a choice of just one or two insurance companies that are willing to write home protection in disaster-prone areas, and that coverage is generally cost prohibitive,” Berthoud said. “IIAA strongly believes Rep. Weldon’s bill and its reinsurance mechanism will reverse this trend by encouraging more companies to return to disaster-prone communities by improving the solvency of homeowners markets in these areas.”
Under H.R. 4025, the Treasury Department would establish a natural disaster reinsurance program and sell the reinsurance contracts to insurance companies and reinsurers via an auction process. Unlike previous natural disaster legislation, the Weldon bill would cover only tropical cyclones, including hurricanes and typhoons; earthquakes and perils resulting from earthquakes, such as fire and tsunamis. The auction program would be conducted on a regional basis, with Treasury required to establish six regions. The reinsurance protection would be tripped infrequently, covering only one-in-100 year events. Any event that does not meet this threshold would be covered by private insurers. The General Accounting Office is expected to score H.R. 4025 revenue neutral, meaning it will not cost the federal government money and could possibly be a revenue-raiser.
“IIAA likes this proposal because it will make reinsurance more available and affordable, which is good news for homeowners,” Berthoud stressed. “This will result in better access to homeowners coverage by millions of homeowners in coastal areas and earthquake-susceptible communities.”
IIAA Director of Federal Government Affairs Justin M. Roth believes the bill will stabilize the homeowners markets in areas prone to natural disasters and spawn self-reliance by insurance companies and reinsurers.
“We believe the approach advocated by this bill will encourage more insurance companies to write in disaster-prone areas,” he says. “H.R. 4025 offers a limited federal role. But its long-term legacy will be the creation of new private-sector initiatives that will resolve the homeowners insurance crisis once and for all.”
The next step for H.R. 4025 will be consideration and debate by the Financial Services Committee, notes Roth.
“IIAA strongly supports Rep. Weldon’s proposal and will work with him and Reps. John and Matsui to build support for H.R. 4025 on Capitol Hill and to offer assistance as the measure begins moving through the legislative process,” Roth said. “The 800 agents and brokers who will be in Washington next week for the IIAA National Legislative Conference will be advocating action on H.R. 4025 during meetings with their congressional representatives.”
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