WASHINGTON–If Congress creates tax-advantaged catastrophe funds, it would save homeowners $11.6 billion annually, according to a study by a coalition that includes some insurers.
The group known as ProtectingAmerica.org presented the study, conducted by Milliman Inc., an actuarial and consulting firm, at a press conference a the National Press Building.
David Appell, principal and director of economic consulting for Milliman, presented the study, which indicated $11.6 billion in annual savings if legislation now pending in Congress is enacted.
State-by-state savings would vary according to a number of factors, including the likelihood of a natural catastrophe, population density and the value of residential property.
For example, annual savings per household in California would average $256; Louisiana, $224; North Carolina, $132; and Oregon, $127.
"Part of the beauty of this approach is that residents of risk-free states would not pay a dime into a catastrophe fund," said James Loy, national co-chair of ProtectingAmerica.org. Mr. Loy is a retired Coast Guard admiral.
'This would significantly reduce the current cross-subsidy that occurs when the federal government steps in to repair and rebuild in the aftermath of regional catastrophes," he said.
In response to a question, Admiral Loy confirmed that Allstate and State Farm are primary sponsors of the coalition. But there are an estimated 250 other members, including private citizens and Fortune 500 companies, he said.
He also dismissed complaints that the program, if enacted, would constitute a bailout of the insurance industry. "This is not about helping insurance companies," he said. "This is about helping people."
It would require an integrated program that includes a state catastrophe fund and a national backstop in addition to the traditional insurance markets, Mr. Appell said. Other factors that would have to be involved to create such savings would have to include mitigation efforts, enhanced first responder programs and expanded homeowner education, he said.
Another consultant, Kenneth Reeves, expert senior meteorologist and director of forecast operations at AccuWeather.com, said such comprehensive catastrophe preparation and protection programs are "critical to the nation."
He explained, "As the population expands and continues to gravitate to the nation's coastline, catastrophic weather events such as hurricanes will have an ever-greater impact on some of the most densely populated regions of the country." He cited New Jersey and New York's Long Island as some of the highly-populated areas that have been spared up until now, despite the current up-cycle of strong hurricanes.
The legislation ProtectingAmerica.org is advocating was introduced in the House in January as H.R. 91, the Homeowner's Insurance Protection Act of 2007. Its primary sponsors are Rep. Ginny Brown-Waite, R-Fla., and Bart Gordon, D-Tenn.
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