Noting that the lack of capacity for catastrophe risk resembles the market for terrorism coverage after the Sept. 11 attacks, House Financial Services Committee Chairman Barney Frank, D-Mass., expressed support for a national disaster insurance system.
"It is clear that the government has to step in," Rep. Frank said at a press conference on Capitol Hill. Although the private market is the preferred option for lawmakers, he said the circumstances of the market for catastrophe coverage had led to a "market failure" in which private insurers simply cannot afford the exposure.
Just as with the market conditions that led to the creation of the federal backstop in the Terrorism Risk Insurance Act, "we have reached a similar point with regards to floods and hurricanes," he said.
Other speakers at the press conference emphasized that the proposed federal backup would apply to catastrophes beyond hurricanes and floods–such as earthquakes, mudslides or volcanoes.
"This is not just a Florida problem," said Rep. Ginny Brown-Waite, R-Fla., noting that rates in other coastal areas have increased dramatically since the record storm seasons of 2004 and 2005.
Rep. Brown-Waite said it was "absolutely paramount" that insurers pass along whatever savings they achieve from a federal backstop to consumers, while Rep. Charlie Melancon, D-La., said the system would be "patterned more like a publicly traded company."
Rep. Tim Mahoney, D-Fla., said the bill would bar the use of anticoncurrent-cause clauses that–for example, in the case of flooding–serve as a bar to claims for damage inflicted by multiple sources.
The program will put an emphasis on mitigation, according to Rep. Ron Klein, D-Fla. "The more we can do with building codes and strengthening properties, the more we can reduce the risk," he said.
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