WASHINGTON, DC – The House of Representatives approved legislation this week that will help coastal states expand access to affordable homeowners insurance by a vote of 258 to 155. 

“The rising cost of homeowners insurance has become a national crisis that now affects every coastal community in the country,” Delahunt said. “This important legislation will restore stability to the homeowners insurance market and will ease pressure on the cost of individual policies.”

The Homeowners Defense Act, HR 3355, authored by Congressmen Ron Klein and Tim Mahoney of Florida,  provides an opportunity for states to responsibly plan for disasters ahead of time, while offering emergency relief for those states that may be in lower-risk regions.

Specifically this legislation will:

Allow states to combine their natural disaster risks together through a consortium.  The bill creates a Natural Catastrophe Risk Consortium, which provides a venue for state-sponsored reinsurance funds to voluntarily bundle their catastrophic 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 reinsurance funds will be better protected and increasingly able to provide a stabilizing effect on the state insurance market by allowing states to responsibly plan for disasters before a catastrophic event occurs.

Create a federal program to provide loans to state reinsurance programs impacted by severe natural disasters.  The bill creates a National Homeowners’ Insurance Stabilization Program within the Treasury Department to provide loans to state reinsurance programs in the event of a severe natural disaster, while also encouraging those programs to accumulate capital sufficient to pay their reasonably anticipated losses.  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 reinsurance fund to cover its liability in the event that it is not fully funded.  Catastrophic loans are available to a state’s reinsurance fund after insured losses in the state exceed 150 percent of the state’s direct written premium for property and casualty insurance. 

Contains provisions to minimize the cost to taxpayers.  The provisions creating the federal loan program are designed to minimize the costs to taxpayers.  Strict requirements are placed on state reinsurance programs in order to qualify for the federal loans.  In addition, loan terms and “penalty” rates are designed so that the Federal Government is the lender of last resort.   
 
Set strict requirements that state reinsurance programs must satisfy in order to participate in the bill’s programs.  The bill sets out specific requirements that state catastrophe reinsurance programs must satisfy before the Treasury Secretary can certify the program as a Qualified Reinsurance Program.  Only Qualified Reinsurance Programs may participate in the National Catastrophe Risk Consortium and the federal loan program created by the bill.  To be certified as a Qualified Reinsurance Program, a state program must reinsure only risks in their state deemed truly catastrophic by the Treasury Secretary.  Furthermore, participating states must also require state insurance and reinsurance programs to establish risk-based rates.

Delahunt is a co-sponsor of this legislation that will now move to the Senate. 

To view a copy of the bill, H.R. 3355, please click here.

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