House Passes Disaster Insurance Bill
November 9th, 2007
By JIM ABRAMS
The Associated Press
Thursday, November 8, 2007; 7:53 PM
WASHINGTON -- Disaster-prone states would get help confronting the crisis in available and affordable homeowner insurance under legislation passed Thursday by the House.
The bill, passed 258-155, was primarily the work of Florida lawmakers from both parties who said they are hearing an outcry from constituents who have lost access to insurance as private insurance companies, following disastrous hurricanes, pull out of the market or dramatically raise premiums.
"In some situations, like in my home state of Florida, the market has deteriorated so drastically, homeowners can't get insurance, regardless of price," said Rep. Tim Mahoney, D-Fla., a bill sponsor with Rep. Ron Klein, D-Fla.
"Those fortunate enough to still have coverage have experienced 200 and 300 percent increases in premiums even though they have not filed a single claim. This is a terrible situation," said Rep. Robert Wexler, another Florida Democrat.
But the White House said a main premise of the bill, the creation of a federally backed consortium of states to pool catastrophe risk, was unacceptable, and that the president would be advised to veto the bill if it reaches his desk. The legislation must still be considered by the Senate.
The White House, in a statement, said states can already join for catastrophe risk and the consortium would create an implicit guarantee that the federal government would backstop its financial obligations.
Mahoney and Klein said their bill would allow state-sponsored insurance funds to voluntarily bundle their catastrophe risk. Private markets would take on the risk through catastrophe bonds and reinsurance contracts.
The bill also creates the National Homeowners Insurance Stabilization Program under which the Treasury secretary can extend loans to states impacted by severe natural disasters.
Several lawmakers offered amendments to assure that the program would not end up subsidizing insurance rates for homes in overdeveloped or high-risk areas and would not result in taxpayers carrying the burden of defaulted loans.
The National Wildlife Federation and the Florida Coalition for Preservation, in a letter to Congress, said they opposed the bill out of concerns the "subsidies could inadvertently result in continued encouragement of risky development in our nation's coastal areas and floodplains."
The bill is H.R. 3355
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