August 3, 2007
Contact: Robin Winchell (202) 225-4031

WASHINGTON, D.C. - U.S. Rep. Charlie Melancon (D-LA) joined members of the Florida congressional delegation and other Members of Congress in introducing legislation to address the growing crisis in the availability and affordability of homeowners insurance (click here for bill).  The Homeowners Defense Act of 2007 focuses on stabilizing the catastrophic insurance market by expanding private industries' capacity to cover a natural disaster and helping states to better manage risk.  The legislation currently has bipartisan support from 35 Members representing 20 states.  Financial Services Chairman Barney Frank supports the legislation and has committed to moving it through his committee in September.

"The skyrocketing cost of homeowners insurance in coastal communities is approaching a crisis point in south Louisiana," said Rep. Melancon.  "Since Katrina and Rita swept through, I have been hearing from my neighbors and constituents that they are facing the difficult choice between paying crushing insurance premiums or permanently leaving south Louisiana, the place they have called home for all their lives.  This shouldn't be."

"We in Congress must act quickly to solve this insurance crisis so that middle class families - the backbone of our economy - can continue to afford to live in coastal communities.  The Homeowners Defense Act will address the rising cost of insurance with a common-sense proposal that will give homeowners more access to affordable insurance while also protecting taxpayer dollars.  I am proud to be an original co-sponsor of this legislation and will continue to work in Congress to make insurance more affordable for homeowners in south Louisiana."

Title I of the Homeowners Defense Act would allow states to responsibly plan for disasters ahead of time, while providing emergency relief for states located in lower-risk regions.  The bill provides a venue for state-sponsored insurance funds, such as the Louisiana Citizens Property Insurance Corporation, to voluntarily pool their catastrophe risk with one another, and then transfer that risk to the private markets through the use of catastrophe bonds and reinsurance contracts.  Following the risk transfer, state-sponsored insurance funds will be better protected and increasingly able to provide services for those who are not able to find insurance on their own. 

Title II of the bill creates a National Homeowners Insurance Stabilization Program to provide low interest federal loans to states impacted by severe natural disasters. By doing so, the federal government will be providing the capital needed to begin the rebuilding process. Specifically, the Program makes available two types of loans: liquidity loans and catastrophic loans.  Liquidity loans would allow a state's catastrophe fund to cover its liability in the event that it is not fully funded. Catastrophic loans would allow state catastrophes fund to cover damages that exceed its liability.  

These common-sense provisions will ensure that states are able to provide for their citizens in the wake of a devastating event.  

Rep. Melancon has been working in Congress to tackle the severe need for affordable homeowner's insurance in coastal Louisiana.  Since Hurricanes Katrina and Rita, premiums in south Louisiana have skyrocketed and many homeowners have had their policies cancelled.  As private insurance companies have pulled out of coastal Louisiana, more and more homeowners have had to turn to the state-sponsored "insurer of last resort," Louisiana Citizens. 

Rep. Melancon is also a co-sponsor of H.R. 920, the Multi Peril Insurance Act of 2007.  The bill calls for a major expansion of the federal National Flood Insurance Program to allow NFIP policyholders to purchase windstorm coverage directly from the federal government, in addition to flood insurance.  The bill was introduced by Rep. Gene Taylor of Mississippi, whose home was destroyed by Hurricane Katrina. 

In July, Rep. Melancon testified before a subcommittee of the House Committee on Financial Services on the severe need for affordable homeowner's insurance in coastal Louisiana.