[Congressional Record Volume 147, Number 60 (Friday, May 4, 2001)]
[Senate]
[Page S4398]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      THE DISASTER TAX EXEMPT ACT

  Mr. GRAHAM. Mr. President, as those of us from our Nation's southern 
and eastern coastal areas know, living in the sunshine of summer can be 
a double-edged sword. As Floridians enjoy the best weather Mother 
Nature has to offer, we must not neglect preparations for the start of 
hurricane season on June 1, 2001. I am pleased to join my colleague 
from Florida, Senator Nelson, and my colleagues from Texas in 
introducing legislation that will help protect Florida from economic 
devastation as sunny days and warm water are accompanied by the 
potential for catastrophic disaster.
  Our legislation amends section 501(c) of the Internal Revenue Code to 
grant tax-exempt status to State chartered, not-for-profit insurers 
serving markets in which commercial insurance is not available. In 
Florida, this legislation will assist the Florida Windstorm 
Underwriting Association, FWUA, and the Florida Residential Property 
and Casualty Joint Underwriting Association, JUA.
  The Florida Windstorm Association was created in 1970. Twenty-two 
years later, in 1992, the legislature authorized the Joint Underwriting 
Association. These organizations operate as residual market mechanisms. 
They provide residential property and casualty insurance coverage for 
those residents who need, but are unable to procure, insurance through 
the voluntary market.
  The JUA was created in direct response to $16 billion in covered 
losses during Hurricane Andrew. The destructive force of Andrew 
rendered a number of property insurance companies insolvent. Other 
firms reacted to the catastrophe by withdrawing from the Florida 
market.
  During those fortunate years when Florida is not hit by major 
hurricanes or other natural disasters, the FWUA and JUA take in more 
premiums than are paid out in claims and expenses. Florida law prevents 
those funds from being distributed so that needed reserves will 
accumulate in preparation for disasters we know will come in the 
future.
  Unfortunately, the Internal Revenue Code penalizes Florida for this 
responsible, forward thinking practice. It requires that 35 percent of 
those funds be sent to Washington, as Federal income taxes rather than 
be used to accumulate reserves. Designating State chartered, non-profit 
insurers as tax-exempt entities will help Florida amass the necessary 
reserves to pay claims brought on by a catastrophe.
  State law also authorizes the FWUA and the JUA to assess property 
insurance policyholders for losses generated by natural disasters. Tax 
exemption will reduce the frequency and severity of assessments levied 
against individual policyholders, because higher reserves will be 
available to cover losses.
  Mr. President, though nearly a decade has passed, Hurricane Andrew is 
still a nightmarish memory for Floridians. The National Weather Service 
expects this hurricane season to be another active storm season. It is 
imperative that the Federal Government avoids the comfortable habit of 
ignoring lessons presented by Andrew and other recent catastrophes.
  Similar legislation has been introduced in the House of 
Representatives and enjoys bipartisan support from Florida's 
congressional delegation.
  Our legislation is extremely important to homeowners and businesses 
throughout Florida, all of whom are subject to assessment if reserves 
are not sufficient to pay claims in the event of a catastrophe. Florida 
remains sensitive to the perils of nature. Enactment of this 
legislation will permit our State to prepare for the next Hurricane 
Andrew while alleviating some of the economic hardship exacted on 
Florida property owners.

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