Summary

Although the insurance industry has absorbed losses from recent natural disasters without systemic failures, concerns exist about its ability to handle losses from potentially larger disasters. The federal government has absorbed a large portion of the losses from past disasters and is likely to pay out even larger amounts in the future. S. 1350 would set up three interrelated programs--a multihazard disaster mitigation program, a primary insurance program for earthquakes and volcanic eruptions, and a reinsurance program to cap insurers' losses when major disasters occur. This testimony explains in detail the provisions of S. 1350 and provides GAO's analysis and concerns about the legislation.