A House subcommittee will hear testimony this week on a bill to encourage states to pool their catastrophe pool risks and then transfer them to the private mamrket.
Rep. Paul E. Kanjorski, chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, and Rep. Maxine Waters, chairwoman of the Subcommittee on Housing and Community Opportunity, announced that the subcommittees will hold a joint hearing entitled “H.R. 3355, the Homeowners Defense Act of 2007. at 2 p.m. on Thursday, Sept. 6.
The bill, introduced by Representatives Ron Klein and Tim Mahoney on Aug. 3 aims to address the availability and affordability of homeowners insurance by providing an opportunity for states to plan for disasters ahead of time, while also offering emergency relief for those states that may be in lower-risk regions.
According to its sponsors, the bill sets up a consortium for state-sponsored insurance funds to voluntarily pool their catastrophe risk with one another, and then transfer that risk to the private markets through the use of catastrophe bonds and reinsurance contracts. Sponsores maintain that following the risk transfer, state-sponsored insurance funds would be better protected and increasingly able to provide services for those who are not able to find insurance on their own.
The legislation further provides for loans that could be extended to any state facing a significant financial shortfall after a natural catastrophe.
Source: House Committee on Financial Services
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