DISASTER
risk more, pooling resources better and finding a way to pre-fund the event.”
Soaring insurance premiums after several hurricanes hit Florida in 2004 and 2005 shook the dream of homeownership. Rising rates, along with higher property taxes, aggravated the housing crisis, which led to the Great Recession and made owning a home in the Sunshine State seem more like a trap than a good investment.
Congress sent $250 billion in aid to Florida and other states hit by natural disasters from 1989 to 2010, according to the Congressional Research Service.
The Florida experience and disasters elsewhere inspired the U.S. House to pass a bill in 2007 sponsored by Democratic thenReps. RonKlein of Boca Raton and Tim Mahoney of Palm Beach Gardens to create a national-catastropheinsurance fund. But the bill quietly died in the Senate when opposed by thenPresident George W. Bush and many in the insurance industry who feared government intrusion in the private marketplace.
Now, inspired by Sandy, some members want to make another attempt, including Democrats Ted Deutch of Boca Raton and newly elected Alan Grayson of Orlando.
A national fund “would make hurricane insurance affordable for Floridians and other people in exposed areas like Louisiana and Alabama and, surprisingly, even in New York City,” Grayson said. “Who would have guessed that? Nowit’s an issue that clearly affects the entire Eastern Seaboard and literally over a hundred million people.”
Proponents hope Congress will consider the measure during its lameduck session this year when deciding on emergency funds for recovery from Sandy. If not, they hope to push it through the next session of Congress.
The latest bill — called the Taxpayer Protection Act, sponsored by U.S. Rep. Albio Sires, D-N.J. — would set up a national-catastrophe fund. Homeowners would continue to buy policies from private insurers, who would then contribute a portion of the premiums to a national fund. That fund would provide reinsurance to back up state disaster programs — such as the Florida Hurricane Catastrophe Fund — for massive losses above a specified amount.
States could opt in or out. The federal government would serve as a financial backstop to reduce the risk for insurers and the need to charge higher premiums. Rates would vary depending on where you live.
“Someone living on the beach in Florida would pay more than someone in Orlando. And someone in Orlando would pay more than someone in North Dakota,” said Edward Collins, nat i onal director of ProtectingAmerica.org, a group devoted to preparing for disasters. “A special provision would limit benefits for affluent homeowners so we make sure that typical homeowners get the benefits of this.”
Critics remain concerned that taxpayers would be on the hook for costly disasters.
“The bad part about the federal government getting involved is that it becomes a bureaucratic nightmare,” said Steven Schwartz, an independent insurance consultant in Fort Lauderdale. “It would take a year for some people to get paid on their claims. You’d have politicians, not insurance people, in the trenches handling this stuff. If the government funds it, fine. If it gets involved in day-today operations, forget it.”
Some environmental groups also object, saying a national f und would amount to a beachfront bailout and encourage development in vulnerable places, such as barrier islands and low-lying areas prone to flooding.
“It actually incentivizes people to live in harm’s way,” SmarterSafer.org, a coalition of environmentalists and insurers, warned Congress last month.
As a result, the legislation faces high hurdles in a divided Congress. But proponents plan to keep trying, saying a public-private pre-funded partnership is bound to be better than sending billions of dollars of aid directly from the treasury.