U.S. Representatives Ginny Brown-Waite (FL) and Vern Buchanan (FL) today introduced the Homeowners’ Insurance Protection Act of 2007, a comprehensive catastrophic insurance bill that would establish a federal reinsurance catastrophic fund (cat fund) as a federal backstop for future natural disasters. While homeowners’ insurance is primarily handled at the state level, there are important roles for the federal government to play, including the establishment of a national catastrophic fund.
The Brown-Waite Buchanan bill encourages states to create catastrophic funds by providing a federal backstop for those states that voluntarily create state funds. The federal fund, to be named the Consumer Hurricane and Earthquake Protection Fund, or HELP Fund, will be housed in the Department of the Treasury and will provide lower-cost reinsurance to state cat funds. Under the Brown-Waite Buchanan bill, should a 1:200 year natural disaster event strike a state, the federal catastrophe fund would provide coverage up to a 1:500 year event.
“Hurricanes, earthquakes, tornadoes and other natural disasters pose a threat to every corner of America,” said Rep. Brown-Waite. “Florida may be hit by hurricanes and California by earthquakes, but homeowners across the nation will face ever growing insurance premiums because of these huge disasters. The Brown-Waite Buchanan bill creates a federal catastrophic reinsurance fund, which state cat funds would contribute to, so that the federal taxpayers would no longer be forced to foot the bill for natural disasters.”
The bill calls for all cost savings achieved through the legislation to be passed along to the consumer, and not kept as corporate profits. Additionally, the legislation creates Catastrophic Capital Reserve Funds; essentially tax deferred savings accounts that may be used by private insurance companies to help offset the costs of 1:100 year events.
“High property insurance costs are making coverage unaffordable to many families and business owners and discouraging investment in our state,” said Congressman Vern Buchanan. “The Consumer Hurricane and Earthquake Protection Fund would lower costs by providing a federal backstop for states that create catastrophic funds.”
“While all Americans have seen the devastation of the hurricanes that hit Florida, Mississippi, Alabama and Louisiana over the last several years, the insurance market must be prepared for the possibility of even bigger disasters in the future,” continued Rep. Brown-Waite. “If the New Madrid fault line in Missouri were to be struck by a massive earthquake, it would cause massive devastation to landlocked cities like Kansas City and St. Louis. We need to have statewide cat funds, with a federal backstop, to help ensure the stability and viability of the insurance market for homeowners.”
“Residents across Florida have made it abundantly clear to their elected members that homeowner’s insurance is in a full-blown crisis,” said Rep. Brown-Waite.
The Florida legislature is set to meet Jan. 16 in special session to address the homeowners crisis, Rep. Brown-Waite added. “I felt it was imperative for our state Representatives and Senators to know their Members of Congress were willing to roll up their sleeves and help find solutions. Because it is so important to my constituents, I introduced the Homeowners’ Insurance Protection Act on the first day of the 110th Congress.”
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