[Congressional Record Volume 145, Number 98 (Tuesday, July 13, 1999)]
[Senate]
[Pages S8385-S8386]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. STEVENS (for himself, (Mr. Inouye, Mr. Lott, Mrs. 
        Feinstein, Mr. Akaka, and Mr. Graham):
  S. 1361. A bill to amend the Earthquake Hazards Reduction Act of 1977 
to provide for an expanded Federal program of hazard mitigation, 
relief, and insurance against the risk of catastrophic natural 
disasters, such as hurricanes, earthquakes, and volcanic eruptions, and 
for other purposes; to the Committee on Commerce, Science, and 
Transportation.


         natural disaster protection and insurance act of 1999

  Mr. STEVENS. Mr. President, today I am introducing the Natural 
Disaster Protection and Insurance Act of 1999. This bill will provide 
the Nation with a way of dealing with major national disasters. As many 
of my colleagues are aware I have maintained an interest in this area 
for some time. Over the last decade we have witnessed natural disasters 
and the devastating effect that they can have on our property, economy 
and quality of life.
  Damages from Hurricane Andrew resulted in the insolvency of insurance 
companies and a lack of confidence within the industry to deal with 
similar catastrophes in the future. Major hurricane risk is increasing. 
Some scientists predict that the next decade will bring more favorable 
conditions for a major hurricane hitting the U.S. than existed in the 
period leading up the Hurricane Andrew.
  Over half of the population of the United States resides within the 
coastal zone (approximately 300 km centered at the coastline). 
Infrastructure and population along our coast is growing rapidly and so 
our vulnerability to hurricanes is increasing dramatically.
  My Home State of Alaska has had at least nine major earthquakes of 
7.4 magnitude or more on the Richter scale. Alaska's 1964 Good Friday 
Earthquake was one of the world's most powerful, registering, a 
magnitude of 9.2 on the Richter scale.
  The Alaska quake of 1964 destroyed the economic basis of entire 
communities. Whole fishing fleets, harbors,

[[Page S8386]]

and canneries were lost. The shaking caused tidal waves. Petroleum 
storage tanks ruptured and the contents caught fire. Burning oil ran 
into the bay and was carried to the waterfront by large waves. These 
waves of fire destroyed docks, piers, and small-boat harbors. Total 
property damage was $311 million in 1964 dollars. Experts predict that 
a quake this size in the lower 48 would kill thousands and cost up to 
$200 billion.
  According to Michael J. Armstrong, associate director, mitigation 
directorate of the Federal Emergency Management Agency:

       Earthquakes represent the largest single potential for 
     casualties and damage from a natural hazard facing this 
     country. They represent a national threat, as all but seven 
     States in the U.S. are at some level of risk.
       In our most recent earthquake disaster, Northridge, (CA), a 
     moderate earthquake centered on the fringe of a major 
     metropolitan area caused an estimated $40 billion in damage. 
     A large magnitude earthquake located under one of several 
     urban regions in the United States could cause thousands of 
     casualties and losses approaching $200 billion.
       Accordingly, reducing earthquake losses is a matter of 
     national concern--recent findings show a significantly 
     increased potential for damaging earthquake in southern 
     California, and in northern California on the Hayward Fault. 
     Studies also show higher potential earthquakes for the 
     Pacific Northwest and Coastal South Carolina. This is in 
     addition to areas of earthquake risk that have already been 
     identified, such as the New Madrid Fault Zone in the Central 
     U.S. and Wasatch Front in Utah.

  Before 1989, the United States had never experienced a disaster 
costing more than $1 billion in insured losses. Since then, we have had 
nine disasters that have cost more than $1 billion.
  Today, Senators Inouye, Lott, Bob Graham, Feinstein, Akaka, and I 
introduce this bill to reduce the cost to the Federal Government of 
earthquakes, hurricanes, and other natural disasters.
  First, the bill will reduce Federal costs by expanding the use and 
availability of private insurance.
  Second, the bill will provide incentives to improve State disaster 
strategic planning.
  And, third, the bill will create a national, privately funded 
catastrophic insurance pool to shoulder the risk of very large 
disasters.
  Mr. President, the more private insurance individuals buy, the less 
disaster relief Federal taxpayers must pay. For instance, if this bill 
had been in place before Hurricane Andrew and California's Northridge 
Earthquake, I am advised that it could have reduced Federal costs by at 
least $5 billion.
  I ask my colleagues to join me and the cosponsors in supporting this 
bill. Because major natural catastrophes are increasingly common and 
costly for U.S. citizens, we must be willing to make a commitment now 
to prepare for these future events in advance.
  Mr. GRAHAM. Mr. President, I rise to join the distinguished chairman 
and Ranking Member of the Senate Appropriations Committee in 
introducing legislation that creates a federal complement to efforts of 
state governments, local communities, and the private sector to make 
future disasters cost less.
  Mr. President, I am a life-long Floridian. When children grow up in 
Florida they learn, usually from first hand experience, to expect 
devastating storm activity in their communities. Hurricane Season is an 
annual event. Florida suffers from often violent summer storms, 
tornadoes, and wildfires. With all of this natural disaster activity in 
my state alone, you can image that the costs of paying for the damages 
incurred by these events is quite staggering. These costs require the 
immediate action of Congress.
  In August of 1992, Hurricane Andrew roared ashore in the middle of 
the night and devastated much of South Florida. The total costs of 
cleanup and rebuilding from Hurricane Andrew was $36 billion. This 
includes nearly $16 billion in total insured loses, of which $12 
billion were homeowner policies. After Andrew 10 private insurance 
companies in the State of Florida were rendered insolvent and had to 
leave the state. Nearly 960,000 insurance policies were canceled or not 
renewed.
  There may be more Hurricane Andrew's in our future. The National 
Weather Service has predicted 1999 will be an extremely active 
hurricane season. They have estimated that up to 14 named storms will 
develop in the Atlantic Ocean, 10 of those are expected to become 
hurricanes.
  The rising costs associated with events such as Hurricane Andrew have 
also demonstrated that insurers face the risk of insolvency if they are 
overly concentrated in vulnerable regions of our country. Since 1992, 
insurers have widely avoided writing policies in disaster prone areas 
of Florida. A congressional report on this subject revealed that the 
total supply of available reinsurance is approximately $7 billion. This 
is only 10 percent of the potential loss which might occur from a worst 
case natural disaster scenario.
  Companies that provide insurance of last resort have entered 
disaster-vulnerable insurance markets and filled this vacuum. 
Generally, these products of last resort provide less coverage than a 
commercial property insurance policy, but at much greater price. In 
Florida, such a policy averages in excess of 500 percent as compared to 
a commercial policy.
  State Insurance Commissions and state legislatures have literally 
created rainy day funds in an attempt to prevent an insurance 
availability crisis. This includes: Florida Catastrophe Reinsurance 
Fund, the California Earthquake Authority, and the Hawaii Hurricane 
Relief Fund. In my State of Florida, we have also created programs to 
provide insurance for those who cannot purchase insurance from any 
private source because of the risk involved including the Florida Joint 
Underwriters Associations, and the expansion of the Florida Windstorm 
Underwriters Association.
  Our recent experience tells us that it is time for Congress to help 
reverse the rising costs of natural disasters. The Natural Disaster 
Protection and Insurance Act of 1999 is a step in the right direction. 
This legislation directs the Secretary of the Treasury to carry out a 
program to make reinsurance available for purchase by eligible state 
programs, private insurers and reinsurers by way of auctions. It 
provides a backstop for state-operated insurance programs, and 
complements existing insurance industry efforts without encroaching 
upon the private sector.
  This initiative appropriately allows state and industry leaders to 
assist in addressing local needs. Specifically,
  Contractural coverage would include residential property losses 
resulting from disasters.
  The Treasury Department would be prohibited from offering any 
coverage that competes with or replaces private insurers.
  A portion of the premiums would go to a mitigation fund to support 
state level emergency preparedness.
  This initiative is a bipartisan and bicameral effort. My Florida 
colleague, Congressman Bill McCollum, has joined Representative Lazio 
to lead this effort in the House of Representatives. We have been 
working closely with the Administration, affected state and local level 
organizations, and private realtors and insurers. We all agree that the 
insurance industry cannot endure the ravage of large scale natural 
disasters alone. Action at the federal level is needed to continue 
insuring individual homeowners and business in areas vulnerable to 
catastrophe.
  Mr. President, we have an opportunity today to continue the working 
partnership between the federal government, states, local communities 
and the private sector. The consequences of insurance shortages and 
exposure to known hazards must be addressed immediately. I encourage my 
colleagues to support this initiative.

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