Another Cat Fund Bill In Congress

WASHINGTON–Two Florida congressmen opened the new 110th Congress late yesterday by introducing legislation that would establish a federal reinsurance catastrophic fund as a federal backstop for future natural disasters.

The Homeowners' Insurance Protection Act of 2007 was introduced by Florida Republican Reps. Ginny Brown-Waite and Vern Buchanan. Mr. Buchanan holds his seat now on a provisional basis while Democrats contest his election.

The Brown-Waite Buchanan bill would create a federal catastrophic reinsurance fund, which state catastrophe funds would contribute to, so that the federal taxpayers would no longer be forced to foot the bill for natural disasters, they explained. Rep. Brown-Waite has introduced such legislation in the past.

Their legislation would create Catastrophic Capital Reserve Funds, essentially tax-deferred savings accounts that may be used by private insurance companies to help offset the costs of once-in-a-hundred-year magnitude events.

The bill is designed to encourage states to create catastrophic funds by providing a federal backstop for those states that voluntarily create state funds.

“The bill makes it clear that any and all cost savings achieved through this legislation must be passed along to the consumer, and not kept as corporate profits,” the legislators said.

Under the bill, the federal fund would be named the Consumer Hurricane and Earthquake Protection (HELP) Fund. It would be housed in the Department of the Treasury and provide lower-cost reinsurance to state catastrophe funds, thus reducing the costs of homeowners' insurance to those around the country.

Under the bill, should a one-in-200-year natural disaster event strike a state, the federal catastrophe fund would provide coverage up to a one-in-500-year magnitude event.

Mr. Buchanan's election this past November is in dispute because his Democratic opponent, Christine Jennings, received no votes among 18,000 cast in Sarasota County, her strongest area in the district.

The House leadership has agreed to seat Rep. Buchanan provisionally.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, told reporters last month that his committee is prepared to consider federal catastrophe reinsurance proposals, but cautioned that action by House committees in the new Congress is not likely to get underway until March, and he has more pressing issues he wants to consider first.