WASHINGTON–A report critical of federal legislation that would create a national risk pool has been lambasted by the plan's supporters as “special interest double-talk.”
The angry comments by officials of ProtectingAmerica.org, established in 2005 by Allstate, highlights a huge split between insurers facing pressure by states to lower homeowner's insurance costs, and reinsurers, who have benefitted from the high reinsurance rates that resulted after the Hurricane Katrina and Rita catastrophes.
Issued on behalf of a new organization called Americans for a Smart Natural Catastrophe Policy, the report that drew fire said the catastrophe legislation under consideration would cost taxpayers billions.
David A. Smith, a director ofProtectingAmerica.org, said the report “is designed to serve the needs of the interests that fund this organization and not the American taxpayer.”
Americans for Smart National Catastrophe Policy is backed by the Reinsurance Association of America, Association of Bermuda Insurers and Reinsurers, Council for Citizens Against Government Waste, Americans for Prosperity, Competitive Enterprise Institute, National Wildlife Federation, Defenders of Wildlife, Friends of the Earth and American Consumer Institute.
On Sept. 8 Congress returns to work. Among the catastrophe measures it has pending is the Homeowners' Defense Act (H.R. 3355), legislation passed by the House last year to create a national fund to pool disaster risk.
Congress is also considering legislation to reauthorize the National Flood Insurance Program before the end of the current federal fiscal year on Sept. 30.
The NFIP reauthorization bill (H.R. 3121) in its House version would have the program offer wind damage insurance as well as flood–a proposal which has united opposition from the insurance industry. The Senate version of the measure does not include wind coverage.
Reinsurers and some insurers created Americans for Smart Natural Catastrophe Policy to lobby against the catastrophe pool bill. The group also opposes adding wind coverage to the NFIP.
The disaster pool bill would allow states to pool catastrophic risk and then transfer that risk to the private market through the sale of catastrophe bonds or purchase of reinsurance. The plan would be backed by the federal government.
The study released by Americans for Smart Natural Catastrophe Policy was prepared by Robert J. Shapiro, who served as Under Secretary of Commerce for Economic Affairs in the Clinton administration, and Aparna Mathur, a Research Fellow at the American Enterprise Institute.
Taxpayers in 20 states would be hit particularly hard by multibillion-dollar burdens under the legislation, the Shapiro-Mathur economic study said.
ProtectingAmerica.org in rebuttal said in part that the Homeowners' Defense Act of 2007, with state catastrophe funds, would save American homeowners more than $11 billion each year on their homeowners insurance premiums, according to the Milliman actuarial firm.
The Homeowners Defense measure, it said, would end the taxpayer subsidies that require homeowners in nonvulnerable areas to pay for uninsured and underinsured losses following every major disaster.
It also scored the report for an analysis centered on the National Flood Insurance Program, and not at all on the Homeowners Defense Act. ProtectingAmerica.org said the report authors “cynically imply that the flood program conclusions apply to the national catastrophe backstop that would be established in the Homeowners Defense Act.”
The analysis assumes that a catastrophe plan will charge inadequate rates, when the Homeowners Defense Act specifically requires rates to be actuarially sound, said the critique.
It added that the analysis in future years is “fatally flawed” because it does not recognize the accumulation surplus from years when there are no events to help pay for future events.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.