Florida members introduce two bills seeking ‘beach house bailout
WASHINGTON (Jan. 15, 2013) — The R Street Institute today expressed strong opposition to the recent introduction of H.R. 240, the Homeowners’ Insurance Protection Act, and the pending reintroduction of the Homeowners Defense Act, both bills that would create a federal bailout fund for state catastrophe reinsurance programs.
H.R. 240 was introduced Jan. 14 by its lone sponsor, Rep. Dennis Ross, R-Fla. The Homeowners Defense Act, which does not yet have a bill number, is set to be reintroduced this week by Rep. Rep. Frederica Wilson, D-Fla., who sponsored similar legislation in the 112th Congress.
Similar to previous “beach house bailout” bills, H.R. 240 would establish a federal program to cover funding shortfalls for state catastrophe funds like the Florida Hurricane Catastrophe Fund in the event a 1-in-200 year storm. Other state-sponsored property insurance programs, such as the Louisiana Citizens Property Insurance Corp. and the California Earthquake Authority, also could opt to purchase reinsurance from the federal program.
R Street Senior Fellow R.J. Lehmann said creating a new federal program would discourage states like Florida from enacting reforms to fix their own state programs, which have grown to unmanageable size due largely to rate regulations that force private companies to cease writing coverage in a particular market. It also would encourage other states to follow Florida’s lead and create their own underfunded catastrophe funds
“By suppressing insurance rates and offering coverage with premiums that are insufficient to cover expected claims, state property insurance programs encourage development in the most risk-prone and environmentally sensitive regions,” Lehmann said. “A new federal reinsurance program would exacerbate all of these programs, all while displacing the vibrant global reinsurance market in favor of concentrating risk on the backs of federal taxpayers.”
R Street is a non-profit public policy research organization that supports free markets; limited, effective government; and responsible environmental stewardship. It has headquarters in Washington, D.C. and branch offices in Tallahassee, Fla.; Austin,Texas; and Columbus, Ohio. Its website is www.redesign.rstreet.org.
