Posted on 12 Mar 2010
The Property Casualty Insurers Association of America (PCI) today submitted testimony to the U.S. House of Representatives voicing concerns over a bill that could displace the private market for natural catastrophe insurance and create added costs for taxpayers across America.
The House Financial Services Subcommittee on Housing and Community Opportunity and Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises heard testimony on H.R. 2555, the Homeowners Insurance Defense Act of 2009, sponsored by Representative Ron Klein (D-Fla.).
“PCI shares the concerns expressed by taxpayer, environmental, and other groups,” said David A. Sampson, PCI’s president and CEO. “This bill 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. That approach is costly to all taxpayers and threatens to displace the private market. By providing government subsidies to artificially suppress costs for coastal properties, the bill would encourage development in high-risk and environmentally sensitive areas.”
In 2009, PCI unveiled its Natural Catastrophe Guidebook that discusses long-term solutions to help reduce losses, ensure a competitive marketplace and limit additional federal exposure to disasters. The Guidebook identifies mitigation as one of the most effective solutions for reducing loss costs following a natural catastrophe.
“We cannot control the frequency or severity of a natural disaster, but we can control how our homes are built,” said Sampson. “The strengthening of homes and businesses through mitigation is one of the most effective ways to bring greater stability to and reduce the costs in the property insurance marketplace.”
A landmark Federal Emergency Management Agency (FEMA) study demonstrated that for every $1 spent on mitigation, $4 or more is saved in clean up, recovery and rebuilding costs. The results of the recent earthquake in Chile, which had strong and well-enforced building codes in place, compared to greater devastation in Haiti, which did not, demonstrates that mitigation saves lives. Approximately 700 deaths occurred in Chile as compared to nearly 220,000 in Haiti, although the Chilean earthquake was more than 500 times stronger.
“We look forward to working with lawmakers to make buildings stronger, families safer, and the property insurance market more stable over the long-term,” said Sampson.
PCI’s full testimony and the Natural Catastrophe Guidebook can be found at: www.pciaa.net.