The House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises and Subcommittee on Housing and Community Opportunity are holding a joint hearing to consider H.R. 2555, the Homeowners’ Defense Act.
Sponsored by Rep. Ron Klein (D.-Fla.), the bill would enable states to pool their risk of natural disasters, by establishing a consortium of state-sponsored insurance funds. While the bill has bi-partisan support in the House, a variety of insurance industry parties are expressing a mix of support and reservations.
“The lack of affordable natural disaster insurance in many parts of the country requires Congressional action, and the consideration of H.R. 2555 is a good first step towards solving this national problem,” says Charles Symington, Jr., SVP of government affairs for the Independent Insurance Agents & Brokers of America (Big I). “While the Big ‘I’ appreciates the inclusion of a national reinsurance backstop in the Homeowners’ Defense Act, such a backstop would better encourage private market participation in problematic markets if it called for private insurer access instead of just state catastrophe funds. We will continue to advocate that Congress consider a solution utilizing the private markets instead of merely state catastrophe funds.”
In a letter to House members, Leigh Ann Pusey, president and CEO of the American Insurance Association, also voiced concern that the fund may discourage private insurers from entering the market.
“Although well-intended, H.R. 2555 will not generate new private sector insurance, reinsurance or capital market capacity,” Pusey wrote. “Instead, it is more likely to encourage the development of state programs that will displace the private market and require a federal government bailout in the event of a catastrophe.”
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