Senate Bills to Accelerate Catastrophe Debate

Three bills introduced in the U.S. Senate last week add momentum to the current debate on Capitol Hill about the need to establish a public/private partnership for catastrophic risks. The bills, introduced by Sen. Hillary Clinton (D-N.Y.) and Sen. Chris Dodd (D-Conn.), take different approaches to the issue and, combined with the recent legislation passed by the House of Representatives (H.R. 3355), set the stage for extensive consideration of the various proposals in 2008.  
  
Sen. Clinton’s bill (S. 2310) is the Senate counterpart to H.R. 3355, authored by Rep. Ron Klein (D-Fla.) and Tim Mahoney (D-Fla.). The cornerstone of the proposal is a federal liquidity facility that would provide short-term loans to states that have been hit with catastrophic losses that exceed their financial resources.  
  
Sen. Dodd’s bills (S. 2327 and S. 2328) would provide an income tax credit of up to $250 to coastal residents in qualifying Atlantic or Gulf Coast states whose property premiums exceed a certain threshold, and would appropriate $200 million a year for 6 years to FEMA, to apportion to the states for mitigation grants and low-income mitigation loans.  
  
“PCI believes that S. 2310, like H.R. 3355 represents a solid baseline on which to discuss the establishment of a public/private partnership to insure catastrophic risks,” said Ben McKay, PCI’s senior vice president – federal government affairs. “PCI supports the liquidity facility concept included in the bill, as well as other provisions of the measure that would stabilize property insurance markets in catastrophe-prone regions. We remain concerned that the bill does not address the need for additional market freedoms that we believe are critical to a long-term catastrophe insurance solution. While we do not support the measure in its current form, we will work with Sen. Clinton to seek enhancements to the proposal so that it meets the needs of all stakeholders - consumers, insurers and public policymakers.”  
  
PCI supports both of Senator Dodd’s bills and believes that the mitigation measure (S. 2328) could help to support already existing state loss reduction programs. “For example, South Carolina enacted a bill that created an entire division within the department of insurance to make mitigation money available,” said McKay. “However, the program is subject to annual appropriations. Federal funding could assure that the South Carolina program – and others like it – deliver on the promise of making buildings stronger and people safer.”   
  
PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association. PCI members write over $194 billion in annual premium, 40.1 percent of the nation’s property/casualty insurance. Member companies write 51.3 percent of the U.S. automobile insurance market, 39 percent of the homeowners market, 32.1 percent of the commercial property and liability market, and 38.7 percent of the private workers compensation market.