Natural Disaster Insurance

REALTORS® want the Senate introduce and pass legislation to create natural disaster insurance that helps protect the states and homeowners ensure the availability and affordability of natural disaster insurance.Our concerns include:

• The risk of an insurance shortage should a mega-catastrophe occur in California.
• The cost of homeowners’ insuranceis increasing annually at double-digit rates in areas across the country, while at the same time major catastrophes are becoming more costly.  In light of the devastation caused by Hurricanes Katrina and Rita, the federal government must take steps to ensure that homeowners’ insurance providers will be able to continue to offer their products at affordable rates.
• Congress should consider grants or tax incentives for property owners to take steps to diminish the impact of natural disasters on their property, such as updating structures to meet the most recent building codes.
• Everyone in the country pays for natural disasters when the government is forced to cover the costs of damaged properties that were either under-insured or had no insurance because the owners couldn’t afford it.  Tax payers could save billions of dollars if Congress would take steps to address this issue.
• According to information compiled by the Insurance Information Institute and the ISO Corporation, eight of the ten most expensive disasters in U.S. history occurred within the past 6 years.  This increase in mega-catastrophes may challenge the insurance industry’s ability to appraise and price these risks reliably. 

General Background:The intensity of large natural disasters in recent years has made the acquisition of adequate homeowners’ insurance very difficult in some areas.  Insurers are declining to write policies, canceling existing policies or increasing premiums on existing policies.  Worse, the U.S. taxpayer and federal government have become a default form of natural disaster insurance as shown by the response to 2005’s hurricane season.  The 2005 Hurricanes Katrina and Rita have refocused attention on this issue in D.C., the insurance industry and across the nation.In California, the question isn’t whether or not a natural disaster will hit, but which disaster and when?  Because of California’s unique geography we face the threat of tsunamis, landslides, floods, volcanic eruption and earthquakes.  The reality is that the California insurance industry and property owners cannot shoulder the full cost of a mega-catastrophe. H.R. 3355 was introduced on August 3, 2007 by Reps. Klein (D-FL) and Mahoney (D-FL).  H.R. 3355 passed the House on November 8, 2007 by a vote of 25-155.