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Claiming a crisis for coastal residents, House lawmakers have introduced a bill that would establish a national commission to examine whether the federal government should act as backstop for insurers in bearing costs for natural disaster claims.

Sponsored by Rep. Debbie Wasserman Schultz, D-Fla., the measure would establish a 17-member commission to determine whether it is possible to create a national catastrophe program administered by the federal government that would serve as a backstop to the traditional insurance and reinsurance industry. The program would be modeled after a similar effort for terrorism risk insurance.

Wasserman Schultz stressed that the program would need to hedge any risk exposure to protect taxpayers and ensure that it would not become a public subsidy for coastal residents. Some insurance companies have stopped offering homeowners insurance for residents along coastal areas, especially in the aftermath of a busy 2005 hurricane season.

For example, Allstate Corp. has said it will not offer any new homeowner policies for residents in New York coastal areas and wants to drop wind and hail damage coverage for 30,000 homeowners along Louisiana's coast.

"There is a growing economic crisis in my home state. The private market for insurance is literally collapsing before our eyes, and not just for homeowners but for commercial firms too," said Wasserman Schultz. "The issue is not only price, but availability; the insurance market is literally drying up."

Reps. Michael Castle, R-Del., and Carolyn McCarthy, D-N.Y., are co-sponsoring the bill. House Financial Services Capital Markets Subcommittee Chairman Richard Baker, R-La., has said he intends to holds hearings to examine the issue.

Allstate has previously been supportive of efforts for a federal backstop for natural disasters, and the issue has picked up support from other industry groups.

"Our members serve as the conduit between consumers and insurance companies, and they understand from experience the marketplace disruption caused by natural disasters," said Charles Symington Jr., senior vice president for government affairs for the Independent Insurance Agents & Brokers of America, which supports the bill.

But the American Insurance Association, the main industry lobbying group, contends that a federal backstop is not needed, noting that $21 billion in new capital has been provided to the reinsurance market since Hurricane Katrina struck last year.

"There is still reinsurance for natural catastrophes, unlike terrorism," said Dennis Kelly, AIA spokesman. The AIA contends that companies can manage disaster coverage with help from state regulations on building codes and coverage flexibility.

COMMENTS

• The same area SoCal has been affected by wild fires on more than one occasion (17 in the last 10 years). Why should fire fighter's lives be endangered and tax payer dollars wasted for people to stay in a hazardous area? Maybe Ill go build my house on a Volcano that erupts every 3 years or maybe a flood zone. Why should tax dollars be spent on people that build their homes under the sea? That's right New Orleans is built 12 feet below sea level. So where exactly is one, 100% safe from natural disasters? The fact is there is nowhere that is completely safe from natural disasters. However, if you are willing to live in an area that year after year experiences natural disasters you are at a minimum "living at your own expense". This choice to live in a hazardous area should be at the homeowners expense and not that of the U.S. taxpayer. Hurricane after Hurricane Wildfire after Wildfire, Earthquake etc..etc. When will people learn? And how many billions of dollars must we pay before they do? mike Posted October 28, 2007 12:00 AM
• In my opinion the government should not insure anyone against anything. We have subsidized and insured farmers to such an extent that we have far too many farmers polluting far too much land. Let half of them go out of business and the rest will earn a passable income to remain on the farm. The same is true in so many areas it is ridiculous. The government has removed the right to fail. This has allowed money to be invested where it should not go and produced results far below normal for Americans. We are in steady decline going back to the new deal and have not been able to reverse or even hold steady the decline. Our economy is moving to China and India and we can do nothing to stop it. It is time our elected officials stop insuring everyone against every loss. Government should get back to government and stop trying to pay off all votes to stay in office. Hard to do when the voters are in it to gain as much in government payoffs as possible. We need some force that will change the attitude of the government and the governed from asking what the country can do for them (JFK). Taxpayer Posted August 7, 2006 7:01 AM
• I live 62 miles inland from the Gulf Coast. I have homeowner's insurance, paid for out of my own pocket. My insurance company is dropping wind and hail coverage, and increasing my premiums because of the 2005 hurricanes. Flood insurance is NFIP (federal), now wind and hail will be through the state "wind pool" at a cost of more than $1,200 per year. Homeowner's for other hazards is also more than $1,000 per year. Two major insurance companies will not write new policies in our state since Katrina-Rita of 2005. If we can't get homeowner’s insurance, we can't get mortgages. So do your research before you go pointing fingers. Most of us are paying for insurance out of our own pockets, but the insurance industry is trying to minimize its risk and increase profits at policyholder's expense. Why should I have an increased premium with reduced coverage? The only difference between "terrorism" (unexpected event) and "disaster" (unexpected event) is one is an act of man, the other is act of God. Why should one be federally insured and the other not? Insurance is to protect against the unexpected -- whatever the event may be. GovExec.com reader Posted August 3, 2006 10:14 AM