WASHINGTON — House Financial Services Committee Chairman Barney Frank expressed support for a national catastrophic reinsurance fund to help stabilize insurance markets after natural disasters.
With homeowners in Florida and Louisiana facing a crippling shortfall of affordable property/casualty insurance policies — following multiple-hurricane seasons of 2004 and 2005 — the Massachusetts Democrat said the time has come for a legislative solution to the problem.
“It is clear that the government has got to step in,” Rep. Frank said last week. “I very much see that some federal backup is necessary, and I am optimistic that we’ll be able to come together” and move legislation.
By passing the Terrorism Risk Insurance Act in 2002, Congress acknowledged that the free market alone is insufficient to handle the increased costs that result from a terrorist attack, he said. “We believe that we’ve reached a similar point with regard to what happens with hurricanes.”
Rep. Frank made his comments at a Capitol Hill press conference, where lawmakers from Florida, Louisiana, and New York had gathered to rally support for legislation to create a national catastrophic reinsurance program.
Similar legislation introduced in the past has failed to achieve broad-based support, but Rep. Frank’s supports indicates that it may be a higher priority for the new Democrat-controlled Congress.
“Hundreds of thousands of policies in Florida alone have either already been dropped or are slated for nonrenewal,” said Ron Klein, D-Fla. “People now fear getting their policy cut in much the same way they fear the storm itself, or the natural disaster itself.”
He and Rep. Tim Mahoney, D-Fla. — the lawmakers spearheading the initiative — have not introduced, or even detailed, their proposed legislation. But a source familiar with the issue said the legislation is likely to incorporate provisions similar to the Homeowners’ Insurance Protection Act of 2007, which was introduced in January by two Florida Republicans, Reps. Ginny Brown-Waite and Vern Buchanan.
That bill is designed to encourage states to create catastrophic funds by providing a federal backstop for the states that do so.
Rep. Klein said that Rep. Frank has committed to hold hearings on the issue.
Senate Banking Committee Chairman Chris Dodd, D-Conn., said March 9 that he plans to hold a hearing on the impact of natural disasters on the insurance markets.
