WASHINGTON–The Bush administration and insurance trade groups are voicing strong opposition to House legislation aimed at helping states secure natural catastrophe insurance.
In a statement of administration position released late yesterday, the administration said it "strongly opposes" the "Homeowners Defense Act of 2007," H.R. 3355. "Accordingly, if H.R. 3355 were presented to the president, his senior advisors would recommend that he veto the bill," the statement said.
The measure is scheduled to be debated on the House floor tomorrow.
In its statement, the administration said it "strongly opposes" provisions in the legislation that would create a federally backed consortium of states in order to pool catastrophe risk.
"Although pooling can be an effective mechanism for managing risk, there is no need for a federal role because states are currently free to associate to address catastrophe risk," the position paper said.
Furthermore, it said, "the consortium's federal charter would create an implicit guarantee that the federal government backstops the consortium's financial obligations."
The statement said this implicit guarantee would result in an "inequitable federal subsidy for certain state insurance programs and policyholders."
Also voicing opposition were the Reinsurance Association of America and the American Insurance Association.
In a statement by Marc Racicot, president, the AIA said, "This legislation raises serious concerns for AIA and its more than 350 member companies, who do not want to see Congress go down the road of creating mechanisms that would impair, rather than improve, insurers' ability to serve the public by providing catastrophe insurance."
In its statement, the RAA contended that a "robust" private global reinsurance market already exists for wind coverage and the bill "would encourage creation of state reinsurance funds that would unnecessarily compete with the private market at the expense of U.S. taxpayers."
The bill was introduced in the House by two South Florida Democratic legislators, Reps. Ron Klein and Tim Mahoney. Companion legislation was introduced yesterday in the Senate by Sens. Hillary Clinton, D-N.Y., and Bill Nelson, D-Fla.
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