NU Online News Service, Oct. 10, 12:40 p.m.EDT

Legislation introduced to make earthquake insurance moreaffordable for homeowners nationally is seen as a “terrible idea”by the Hartland Institute.

The Campbell bill (H.R. 3125), introduced Oct. 6 by California'sU.S. Rep. John Campbell (R-48), is companion legislation to S.637,introduced by U.S. Sen. Dianne Feinstein earlier this year.

According to the California Earthquake Authority (CEA), bothbills would strengthen the nation's natural-disaster recoverysystem by enacting the Earthquake Insurance Affordability Act(EIAA).

H.R. 3125 currently awaits consideration in the House Committeeon Financial Services.

The EIAA would allow well-capitalized statecatastrophe-insurance programs to lower costs by allowing thefederal government to guarantee bonds issued by these institutions,in lieu of purchasing reinsurance, which currently accounts for atleast 40 percent of costs, the CEA says.

If enacted, the CEA maintains the EIAA would save the CEA anestimated $100 million per year and allow it to lower its rates by20 percent, expanding earthquake-insurance coverage across thestate. Additionally, it says, the legislation protects taxpayers asinsurers would pay the U.S. government for its guarantee and thefee could be adjusted upward after a major disaster.

“We cannot avoid natural disasters, but we can plan ahead andtake action now to protect against the inevitable. In the past, thefederal government has had to deploy vast financial resources inthe wake of a major disaster,” Campbell says upon introduction ofthe House version of the EIAA. “This bill will help limit this needin the future by both making earthquake insurance a feasible optionfor all homeowners and setting up a system in which investorsperform a role traditionally filled by the government. Expenses tofederal, state and local governments would be mitigated withincreased earthquake coverage at no cost to the taxpayer.”

But The Heartland Institute maintains that the bill puts allfederal taxpayers on the hook for billions of dollars in potentialfuture losses sustained by the CEA.

Although not named specifically in the legislation, TheHeartland Institute says, CEA is the only entity that qualifies forthe “federal bailouts” (debt guarantees) the bill would require alltaxpayers to provide.

Eli Lehrer, vice president for Washington, D.C. operations atThe Heartland Institute and national director of its Center onFinance, Insurance, and Real Estate, harshly criticizes thebill.

He notes, “Rep. Campbell's bill is among the very worst ideasintroduced in the current Congress—and that's saying a lot. Itwould cost taxpayers billions of dollars, displace a productiveprivate industry and do nothing to make California consumers safer.One really has to wonder what Rep. Campbell is thinking byforwarding such a terrible idea.”

Supporters of the bill include insurers Automobile Club ofSouthern California and Mercury Insurance Group; the CaliforniaAssoc. of Realtors and the California Building Industry Assoc.; andother organizations including consumer advocates UnitedPolicyholders as well as the American Red Cross, the CaliforniaState Assoc. of Counties and the California Taxpayers Assoc.,according to the CEA.