U.S. Rep Mahoney Urges NCOIL To Back Cat Bill

Feb 29, 2008

National Underwriter--Feb. 28, 2008


WASHINGTON —A Florida congressman urged state legislators today to persuade members of the U.S. Senate to support legislation that would allow states to pool their catastrophic risks.

Rep. Tim Mahoney, D-Fla., told members of the National Conference of Insurance Legislators at their spring meeting here today that the catastrophic risk problem Florida faces is not unique to that state.

“I want to make sure that everyone here today understands that this is not just a Florida problem—it is a national problem,” said Rep. Mahoney.

“It is clear that states all around the Gulf Coast from Texas to Maine are facing a homeowners’ insurance crisis,” he said.

“My colleagues in California with earthquakes and fires,” Rep. Mahoney said. “My friends in Oklahoma and Ohio with tornadoes and floods. We all are facing the same challenge.”

The legislation Rep. Mahoney is seeking support for is H.R. 3355, the Homeowners’ Defense Act, which is co-sponsored with Rep. Ron Klein, D-Fla., whose district adjoins Rep. Mahoney’s.

Under the bill, states would be allowed to take their pooled catastrophic risk and then transfer it to the private market through the use of catastrophe bonds or the purchase of reinsurance. Additionally, the bill would establish a National Homeowners Insurance Stabilization Program to provide low interest federal loans to states impacted by severe natural disasters.

Mr. Mahoney’s bill passed the House last November but is facing strong opposition in the Senate, as well as the threat of a presidential veto.

A resolution proposed by Florida State Sen. Steven Geller, D-Hallandale Beach, urging Senate support for H.R. 3355 is being discussed at the meeting.

At a hearing on catastrophic insurance issues held before Rep. Mahoney spoke, members of NCOIL said they would delay a possible vote on the resolution until their July meeting in order to allow insurance industry officials to provide the state legislators with detailed statements outlining their views on the legislation.

“The bill works because it encourages states to adopt their own natural catastrophe plans, as well as modern building standards,” Rep. Mahoney said.  In addition, he said, the National Insurance Stabilization Program eliminates the timing risk involved for states seeking to create a reinsurance plan.

“The bill eliminates cross-subsidization,” Rep. Mahoney said. “Because the bill utilizes federal loans that must be paid back by affected states, never again will the farmer in Nebraska or the miner in West Virginia have to write a check for a natural disaster,” he said.

“It is imperative that Congress create a fiscally responsible natural catastrophe plan that does not leave American taxpayers from all around the country on the hook,” he added.