Should US taxpayers bail out Shore, Florida homeowners?
Would federal reinsurance "force taxpayers to bail out states such as Florida along with owners of expensive coastal homes"?
US Rep Paul Kanjorski, D-Pa, is running a hearing in Congress this afternoon to review the Homeowners Defense Act (H.R. 2555), sponsored by Rep. Ron Klein, D-Fla. The Insurance Journal lays out both sides here. Testimony here. Highlights of the article:
"The Homeowners' Defense Act would allow up to 30 states to choose to share risk in a catastrophe insurance pool that would be backed by federal reinsurance. The bill would also provide federal guarantees of bonds issued by the state funds. It also encourages states to adopt mitigation measures and comprehensive land use plans-- which its critics say should be the primary focus instead of insurance subsidies...
"Critics, including an unusual coalition of insurers [Chubb, Liberty Mutual, Swiss Re], taxpayer groups and environmentalists [Environmental Defense Fund, Sierra Club] that goes by the name SmarterSafer.org, say the Klein approach does nothing to solve the underlying issues and would simply perpetuate a flawed and costly approach. They say the Klein approach would undermine private markets and force taxpayers to bail out states such as Florida along with owners of expensive coastal homes.
"It would also harm the environment by encouraging continued building in environmentally sensitive locations...
"The groups point to the experience of the National Flood Insurance Program, which they said has kept consumers' flood insurance costs low, but has 'done too little to reduce risk, and in fact it has been a major factor in increasing risk' by encouraging the building or rebuilding of high-risk properties. The flood insurance program is now nearly $20 billion in debt."