Clinton, Nelson Introduce Catastrophe Insurance Bill to Help Homeowners Access Disaster Insurance

Legislation Outlines Innovative Proposal to Ensure that Flood, Hurricane and Other Disaster Insurance Remains Available and Affordable for All Americans

November 6, 2007 -- Washington, DC – Senators Hillary Rodham Clinton (D-NY) and Bill Nelson (D-FL) today introduced the “Homeowners Defense Act of 2007,” an innovative proposal to pool and diversify catastrophe risk to make disaster insurance for hurricanes, floods, fires and other natural disasters more available and affordable for American homeowners. The Clinton-Nelson bill is companion legislation in the Senate to the bill introduced in the House of Representatives by Congressmen Ron Klein (FL-22) and Tim Mahoney (FL-16).

In introducing the bill, Senators Clinton and Nelson emphasized that, with the increased risk of floods, hurricanes, and other natural disasters throughout the nation, the catastrophe insurance market has become volatile in many regions with insurers either pulling out of markets, not writing new policies or charging prohibitively high rates. The result is that many American homeowners are increasingly caught in the Catch 22 of skyrocketing homeowners insurance premiums or little or no insurance coverage in the event of a disaster.

“The current insurance market isn’t responding fast enough to the new and heightened risks that many homeowners face,” said Senator Clinton. “We need a fresh and innovative approach to the current insurance problem that will help homeowners get access to effective and affordable disaster insurance. I applaud Congressmen Klein and Mahoney for their vision and leadership in championing this legislation in the House, and I am proud to introduce the Senate companion bill with Senator Nelson, which deserves the Senate’s consideration.”

“I believe the Congress needs to debate all the plans for fixing the property insurance mess created by the hurricanes that hit Florida and the Gulf Coast,’’ said Senator Nelson, a former insurance commissioner in Florida who has offered seven other proposals aimed at making homeowners insurance more affordable. “The idea of giving states disaster loans to help them recover from catastrophic losses should help stabilize the insurance marketplace.”

“I am grateful Senator Clinton and Senator Nelson are introducing the Senate companion to The Homeowners Defense Act of 2007, common sense legislation Congressman Tim Mahoney and I crafted that will provide critical relief to homeowners by increasing the availability and affordability of homeowners insurance,” said Congressman Klein. “Now more than ever, it is time to institute a plan that will provide stability within the market, which we believe will ultimately lead to lower insurance rates for consumers. We are confident both Senator Clinton and Senator Nelson will work hard to gain support from both Democrats and Republicans, and ensure the passage of this groundbreaking bill in the United States Senate.”

“Millions of Americans who are struggling to make their house payment this month will thank Senators Clinton and Nelson for their leadership on this issue and for recognizing that this is a national problem. This legislation stabilizes the homeowners’ insurance market and eliminates the need for the federal government to bail out communities for natural disasters that can be planned for," said Congressman Mahoney.

The Homeowners Defense Act focuses on stabilizing the catastrophe insurance market by expanding the private sector’s capacity to cover a natural disaster and helping states to better manage risk. The Clinton-Nelson bill establishes a Catastrophic Risk Consortium, a non-Federal entity, which states will have the option to join. States will participate by allowing their state-sponsored insurance funds to voluntarily bundle their catastrophic risk with one another in the Consortium. The risk would then be transferred to the private markets through catastrophe bonds issued by the consortium and negotiated reinsurance contracts. The bill also provides for federal loans to states impacted by severe natural disasters to help ensure a state fund’s liquidity in the event of a disaster. This bill will help facilitate and enhance homeowners’ access to insurance, which may ultimately result in lower insurance rates.

Source: Senator Hillary Rodham Clinton