NAR Immediate Past President, Charles McMillan recently testified before a Congressional panel addressing emerging and current problems in property insurance markets across the country. The cost of natural disasters, such as hurricanes, floods, and earthquakes, are devastating for communities. The devastation leaves no segment of the community untouched. Individuals, local, state and governments and insurance companies all suffer financial losses. For the insurance companies, the response is obvious, faced with increased claims insurers have raised property insurance premiums or declined to write policies in disaster prone areas. The congressional hearing was held to explore the problems and discuss possible legislative and private sector solutions.
As it stands today, U.S. policy toward dealing with the effects of a natural catastrophe is largely reactive rather than proactive. For example, when Hurricane Katrina struck the southeastern coastline, the federal government paid for much of the cleanup. According to the General Accountability Office, $26 billion of taxpayer dollars went directly to under-insured property owners. That $26 billion was paid by ALL taxpayers, not just those not living on the Gulf Coast. More widely available and affordable property insurance would have stressed preparedness and protection, not just post-incident recovery.
NAR believes that a comprehensive forward-looking national natural disaster policy is needed. Such a policy would recognize that property owners, the private insurance markets, and all levels of government must work together in order to successfully address the lack of available and affordable property insurance currently affecting some parts of the U.S.
Specifically, NAR supports the creation of a federal policy to address catastrophic natural disasters that:
- Ensures that transparent and comprehensive insurance coverage is available and affordable, with premiums being reflective of the risk involved;
- Acknowledges the personal responsibility of those living in high-risk areas to undertake mitigation measures, including the purchase of adequate insurance;
- Provides property owners adequate incentives to undertake mitigation measures where and when appropriate;
- Acknowledges the importance of building codes and smart land-use decisions, while also emphasizing that proper enforcement of both is best left in the hands of state and local governments;
- Recognizes the role of States as the appropriate regulators of property insurance markets, while identifying the proper role of federal government intervention in cases of mega-catastrophes; and
- Reinforces the proper role of all levels of government for investing in and maintaining critical infrastructure including levees, dams, and bridges.
Congress is considering many pieces of legislation designed to shift much of the taxpayer burden back to property owners by incentivizing state-government and private-insurance efforts to increase the availability and affordability of property insurance and encourage preparation and mitigation.
H.R. 2555, the “Homeowners’ Defense Act,” would offer a comprehensive solution. A bi-partisan bill with more than 70 co-sponsors from 30 different states, it provides access to federal reinsurance and a guarantee for state loan programs, as well as stable funding sources so there is more consistency in insurance availability and affordability.
Others have introduced legislation which provides tax incentives including H.R. 308 by Rep. Gus Bilirakis for property mitigation and H.R. 998 by Rep. Tom Rooney for insurance company reserve funds to pay claims arising from catastrophic events.
All of these ideas could work together as critical elements of a comprehensive solution. Not only would such measures protect the private market from collapse but they also ensure that resources are available to rebuild after the next mega-catastrophe.
NAR will continue to work with Congress to ensure meaningful long-term reform is achieved.
For more information on this issue visit: www.realtor.org/government_affairs/natural_disaster
Source: NAR Eye on Washington
