Posted on 28 Apr 2010
The Property Casualty Insurers Association of America (PCI) sent a letter of strong opposition today to the House Financial Services Committee in regard to H.R. 2555, the "Homeowners Insurance Defense Act", sponsored by Representative Ron Klein (D-Fla.)
“H.R. 2555 would broadly shift taxpayer resources from the entire country to benefit specific catastrophe-prone areas through the proposed federally subsidized bond guarantees and the reinsurance catastrophe fund provisions,” said David Sampson, president and CEO of PCI. “This approach is costly to all taxpayers, and threatens to displace the private market. Moreover, by providing government subsidies to artificially suppress costs for coastal properties, the bill fosters significant moral hazards that encourage building and development in high-risk and environmentally sensitive areas.”
PCI strongly opposes this legislation along with taxpayer, environmental, and other groups. The PCI Natural Catastrophe Guidebook (www.pciaa.net) details how the concerns raised by the bill’s sponsors can be better addressed when broken down into more discrete issues. “As we work together on long-term solutions, greater attention should be placed on loss mitigation efforts and comprehensive land use policies to protect consumers through reduced exposures,” said Sampson.
“We understand the frustration and especially difficult situation for consumers and coastal lawmakers regarding the affordability and availability of homeowners insurance since the unprecedented storm season of 2004 and 2005,” said Sampson. “That is why PCI wants to work with all stakeholders to develop and implement targeted solutions at both the state and federal level that will restore control and confidence to coastal insurance consumers.”
The plight of Florida in recent years has shown how a short-term government fix can lead to long-term pain. In 2007, the Florida legislature chose to greatly expand the Florida Hurricane Catastrophe Fund (CAT Fund) and Citizens Property Insurance Corporation (Citizens), creating a system that is today widely recognized as being fiscally unsustainable and threatens the financial future of the entire state. Florida has unique demographic and geographic problems – the state is more susceptible to catastrophic storms than anywhere else in the world and has over $2 trillion of coastal property exposed to such disasters. This will require narrowly targeted solutions and fiscally sound market-driven approaches to enhance competition and consumer choice.
“Solving Florida’s property insurance problems will not be easy and will not happen overnight,” said Sampson. “But the road to recovery must start in Tallahassee, not in Washington, D.C.”