Posted on 19 Mar 2013 by Neilson
A bill introduced in the U.S. House of Representatives that would create a national catastrophe fund is facing opposition from a coalition of insurance, environmental and taxpayer advocates.
HR 1101 would create a privately funded national catastrophe fund designed to respond to large-scale natural catastrophes. It would require private-sector financing for catastrophe losses that would go to building a backstop of funds that would be made available when large natural disasters occur. The bill's chief sponsor, U.S. Rep. Albio Sires, D-N.J., said a national catastrophe fund would drive down the cost of catastrophes, including for those who live in areas with major catastrophe risk. Sires said the fund would encourage more homeowners to become covered.
"There is a growing consensus in all areas of our nation that action needs to be taken now to address the weaknesses in our methods of planning for and responding to natural catastrophes," Sires said in a statement. "It is clear that we need a better way to provide relief funding without burdening taxpayers or stretching the federal budget."
But SmarterSafer.org came out against the bill, saying it would "put taxpayers on the hook for billions of dollars in losses, encourage risky development in environmentally sensitive areas, and do nothing to protect people and property in harm's way."
SmarterSafer.org's members include Allianz of America, Association of Bermuda Insurers and Reinsurers, Chubb Corp., Liberty Mutual Group, National Association of Mutual Insurance Companies, National Flood Determination Association, Reinsurance Association of America, SwissRe and USAA.
The property/casualty sector has opposed past attempts to create a national catastrophe fund. In 2010, opponents of a bill similar to HR 1101 argued that catastrophe risk can and should be handled by private companies. Environmental groups said they were concerned about incentivizing more development in coastal areas.
The 2010 bill failed to gain traction in the House and died before reaching the Senate.
This year, SmarterSafer.org said in a statement that "A federal backstop for disaster insurance replaces private-sector insurance with the American taxpayer. [HR 1101] is a Beach House Bailout that would displace private property and casualty insurance with a costly federal reinsurance scheme putting billions of taxpayer dollars at risk to help those who have beach houses and other types of beach-front properties."
Efforts to reach SmarterSafer.org for additional comment were not immediately successful.