Homeowners' Defense Act closer to reality

The impact of rising homeowners' insurance premiums, reduced coverage and policy cancellations is being felt by more and more homeowners throughout the United States. This is a problem that Floridians know all too well and have been dealing with for more than 10 years.

The rising costs resulting from natural disasters have placed a strain on homeowners, jeopardizing the ability of families to protect what is traditionally their most valuable asset, their home. With property-insurance issues now spreading well beyond Florida's borders, some relief may be in sight.

Though Florida homeowners keep an eye on the weather radar during hurricane season, their fears unfortunately no longer dissipate at the close of hurricane season. With property insurers moving to significantly increase rates or deny coverage outright to hundreds of thousands of policyholders, people are beginning to fear that their coverage may be dropped as much as they fear the storm itself.

This cycle of rising rates and falling coverage is unacceptable. We no longer can expect homeowners to shoulder a dramatic and often unwarranted rise in premiums, while at the same time hoping that their coverage will not be canceled if they file a claim. Now that states in multiple regions are beginning to face the same insurance problems as Florida, Congress has realized that federal action is necessary.

Prior to my election to Congress, last year I promised that, if elected, I would work to make the availability and affordability of homeowners' insurance a top priority. Once I arrived in Washington, Rep. Tim Mahoney, D-Palm Beach Gardens, and I began drafting a blueprint to provide federal assistance to supplement the actions of states dealing with property insurance issues. We each sought and received a seat on the House Financial Services Committee, which would allow us to craft and oversee the development of national insurance catastrophe legislation.

For several months, we have been meeting with constituents, industry representatives, policy groups and academics to address the availability and affordability of homeowners' insurance. That effort culminated with the introduction of HR 3355, the Homeowners' Defense Act of 2007.

The legislation provides a venue for state-sponsored insurance funds to voluntarily pool their catastrophe risk with one another, and then transfer that risk to the private markets through the use of catastrophe bonds and reinsurance contracts. The bill also allows for the federal government to extend low-interest loans to cash-strapped state insurance funds after a large-scale natural disaster, so that they can meet their obligations to homeowners.
By utilizing new strategies and an innovative capital market approach, the bill allows investors to assume some of the risk currently held by the states, in return for an interest payment. The voluntary nature of the program, coupled with the use of the capital markets, ensures that homeowners in less disaster-prone states will not be on the hook if a disaster strikes a neighboring state.

Under the bill, participating states would be presented with the tools necessary to responsibly manage their risk before a disaster strikes, while also ensuring that they can quickly and efficiently respond to homeowners' insurance claims following a natural catastrophe. The goal of this legislation is to stabilize the insurance market, thus increasing competition and lowering premiums over time.

The Homeowners' Defense Act already has the support of House Speaker Nancy Pelosi, Financial Services Committee Chairman Barney Frank and members representing more than 20 states. A Financial Services Committee hearing will take place today, and we believe that the full House will move to consider the bill soon.

Last week, I joined Reps. Mahoney and Robert Wexler, D-Delray Beach, to host a forum in West Palm Beach on this bill. We had the opportunity to explain our bill to constituents and answer questions about how we believe our plan will provide relief to Florida homeowners.
With the Homeowners' Defense Act offering to provide states with much-needed assistance, we are moving forward to make this plan a reality.




cross posted at http://BrowardForChange.com/blog


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