Legislation establishing a national catastrophe fund has againbeen introduced in the House, and has again drawn the ire ofperennial critics.

The legislation is known derisively amongst critics, includingthe reinsurance industry, as constituting a “Beach HouseBailout.”

H.R. 1101 was introduced in the House by Rep. Albio Sires,D-N.J., obviously in response to Superstorm Sandy, which did majordamage to coastal areas in New York, New Jersey andConnecticut.

The bill was first introduced in 2007 by former Rep. Ron Klein,D-Fla., in response to the soaring cost of homeowners insurance inthe state and concerns that the windstorm facility created by thestate as a reinsurance system would become insolvent in the eventof a major hurricane. It was introduced in the subsequentcongresses until Klein was defeated in the Republican wave ofNovember 2010.

The legislation would create a national-catastrophe fund whosepurpose would be to respond to large-scale events. Private-sectorfunds would be used under the legislation aimed at building upenough cash as a backstop for paying claims resulting from a majorweather event.

Sires said the bill would improve on Klein's initiatives Thebill improves on a previous proposal sponsored by Klein byrequiring exclusively private pre-funding for catastrophe losses toconstruct a backstop of accessible funds for when such devastatingevents occur.

“As a result, this legislation would drive down the cost ofinsuring all Americans, including those who live in areas withmajor catastrophe risk and encourage many more homeowners to becovered,” Sires said.

However, R.J. Lehmann, a senior fellow at the Washington thinktank R Street, the federal government would ultimately be forced toguarantee liabilities from government-run property insuranceschemes like the Florida Hurricane Catastrophe Fund, whichcurrently has $17 billion in liabilities, but would be unable tomake good on billions of dollars in claims if a large hurricanewere to strike the state.

He said, “While federal cat-fund supporters often claim theywould require participating state cat funds to charge actuarialrates to participate in the federal program, the reality is thatany fund that did charge actuarial rates would not need federalsupport in the first place.”

SmarterSafer.org also came out against the bill, saying it would“put taxpayers on the hook for billions of dollars in losses,encourage risky development in environmentally sensitive areas, anddo nothing to protect people and property in harm's way.”

SmarterSafer.org's members include Allianz of America,Association of Bermuda Insurers and Reinsurers, Chubb Corp.,Liberty Mutual Group, National Association of Mutual InsuranceCompanies, National Flood Determination Association, ReinsuranceAssociation of America, SwissRe and USAA.

However, in defense of the legislation, Admiral James Loy,ProtectingAmerica.org co-chair and former deputy secretary ofHomeland Security, says, “We need to recognize that citizensliving in areas most likely to be affected by natural catastrophesare disproportionately those that can least afford it. This isn't abeach-house issue or a summer vacation issue – this is an issue offiscal responsibility that concerns primary residence homeownersacross America. We need a policy to help get more people insured,to pre-fund for these events, and to reduce the enormous costs ofrecovery after a catastrophe.”

Updated with comments from ProtectingAmerica.org.