[Congressional Record Volume 142, Number 84 (Monday, June 10, 1996)]
[House]
[Page H6092]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   INTRODUCTION OF THE CALIFORNIA HOMEOWNER EARTHQUAKE PROTECTION ACT

  (Mr. LEWIS of California asked and was given permission to address 
the House for 1 minute and to revise and extend his remarks.)
  Mr. LEWIS of California. Mr. Speaker, I am today introducing the 
California Homeowner Earthquake Protection Act, legislation granting 
tax-exempt status on State authorities established for the purpose of 
providing earthquake insurance. As a 30-year insurance professional the 
chairman of the House Appropriations Subcommittee overseeing FEMA and 
Federal disaster assistance, I am concerned about an emerging insurance 
crisis in my State.
  California Governor Pete Wilson is poised to sign a measure 
establishing the California Earthquake Authority [CEA], a unique 
publicly run and privately financed State program to supply earthquake 
insurance for millions of homeowners in our State. The California 
Homeowner Earthquake Protection Act will add viability to the CEA and 
will address a looming and potentially devasting crisis affecting every 
homeowner--the ability to purchase affordable earthquake insurance.
  Under California State law, insurance companies that sell homeowners 
coverage are required to offer earthquake protection as well. However, 
as a result of the 1994 Northridge earthquake which resulted in over 
$1.2 billion in insured losses, many insurance companies are now moving 
out of the marketplace. In fact, of those companies that offered 
earthquake coverage before the Northridge earthquake, 95 percent no 
loner offer policies to homeowners. In the near term, over 1 million 
families may not have their homeowner coverage renewed.
  The CEA is designed to provide $10.5 billion in earthquake coverage 
funded by insurance carriers, reinsurers, investors, and policy holder 
assessments. The success of this innovative public-private partnership, 
which will provide immediate insurance relief for hundreds of thousands 
of California homeowners, condominium owners, mobile home owners, and 
renters, depends largely upon the IRS granting the CEA tax-free status. 
Tax-exempt status would allow the Authority's reserves to accumulate 
free of Federal income taxes. The IRS, which had promised a tax 
exemption to the CEA in February, withdrew its decision without warning 
or explanation in April. Legislation at the Federal level is now 
necessary to require the IRS to stand by its initial decision.
  Continued uncertainty over the tax status of the CEA threatens to 
kill this public-private partnership. I urge my colleagues to join me, 
Gov. Pete Wilson, California Insurance Commissioner Chuck Quackenbush, 
and other in this bipartisan effort to protect California homeowners. 
We must act now to avert a financial crisis every bit as devastating as 
the Northridge earthquake itself.

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