U.S. 'No Better Off' Now Than After Hurricane Katrina

NU Online News Service, Aug. 24, 3:52 p.m. EDT

A nonprofit organization in support of the Homeowners Defense Act is using the anniversary of Hurricane Katrina to remind lawmakers the country is no better off today.

ProtectingAmerica.org, a coalition that includes Allstate and State Farm insurance companies, said the country remains unprepared for a disaster like Katrina, which struck five years ago on Aug. 25 and caused more than $45 billion in insured losses.

"When it comes to shoring up the financial system that stands behind homeowners, communities and insurers, we are no better off than we were when Katrina struck," said James Lee Witt, co-chair of the organization and former director of the Federal Emergency Management Agency.

Given the current economic environment, "we may be even worse off than we were five years ago," said Mr. Witt.

A hurricane striking near an urban center from New York to Houston would devastate lives, homes and businesses–dwarfing the economic impact caused by Katrina, said retired U.S. Coast Guard Admiral James M. Loy, co-chair of the organization.

The bill the organization supports, H.R. 2555, has existed in various forms for several years. Primarily, the bill looks to create a federal backstop for state catastrophe funds and federal loans if state funds are tapped following a major event.

Mr. Witt and Mr. Loy said the act is a solution to the current "after-the-fact" model for recovery, which relies on federal taxpayers to cover what insurers and reinsurers cannot.

Not everyone in the industry is for the bill. In June, SmarterSafer.org–comprised of members from the insurance industry, environmental organizations and consumer advocates–wrote lawmakers to urge them to oppose the Homeowners Defense Act.

The group's members include the Reinsurance Association of America, Association of Bermuda Insurers and Reinsurers, National Association of Mutual Insurance Companies, Allianz of America, Chubb, Liberty Mutual Group, Swiss Re, and USAA.

SmarterSafer.org said the bill will require taxpayers throughout the U.S. to subsidize higher-risk states and that the program would cost billions of dollars to run.

The Homeowners Defense Act was approved by the House Financial Services Committee on April 27 and is awaiting action by the full House.

Corrected to remove the National Association of PIA as a member of SmarterSafer.org. The association was incorrectly included as a member in SmarterSafer.org's June letter, but it had ended its membership in the Spring.