[Congressional Record Volume 152, Number 75 (Tuesday, June 13, 2006)]
[Senate]
[Pages S5770-S5771]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                HURRICANE SEASON AND INSURANCE COMPANIES

  Mr. NELSON of Florida. Mr. President, I wish to address a topic that 
is appropriate, since tropical storm Alberto is on the coast of 
Florida--in the Big Bend area of Florida--right now. Fortunately, 
Alberto stayed a tropical storm, although there was a moment last night 
when the National Hurricane Center thought it was going to become a 
hurricane, which is 74-plus miles an hour.
  Isn't it interesting that here we are in early June--normally, 
hurricanes don't really start brewing up until July, and the severe 
ones don't start brewing up until August and September. But we see the 
confluence of two things. We see not only the active hurricane cycles 
the meteorologists will tell you about, that these are 10- and 15-year 
cycles and hurricanes will become much more active and much more 
frequent. When you add that meteorological phenomenon to the fact of 
global warming where, as the Earth's temperatures rise because of the 
trapping of the greenhouse gases, the rising of the temperature of the 
water, the rising of the temperature of the atmosphere--the effect of 
that is more frequent and more ferocious storms. Whether that global 
warming is affecting this particular cycle, I know not. But I know that 
the phenomenon of global warming added to--if we are in a 10- or 15-
year meteorological phenomena of hurricane cycles, that can add all the 
more to the distress, dismay, and tragedy that the Atlantic and the 
gulf coast of the United States will suffer over the coming number of 
years.
  That brings me to the subject matter: the cost of insurance, 
particularly homeowners insurance, which is going to--if it hasn't 
already--become prohibitive for coastal dwellers. It is not just 
coastal dwellers because the insurance rates are spread in a particular 
way where the property owner will share in the burden of the cost of 
insurance no matter whether the homeowner lives on the coast or lives 
inland. This is exactly what has happened to the gulf coast as a result 
of Katrina. It is what happened in Florida for the active hurricane 
year of 2004, in which four hurricanes hit Florida within a 6-week 
period. As a result, you see insurance rates that are absolutely 
escalating, with the phenomenon that is now occurring in Florida and 
Gulf States, including Alabama; Mississippi, the home of the 
distinguished senior Senator from Mississippi, who is on the floor at 
the moment; Louisiana; and eventually it will happen to Texas when they 
get pounded a couple of times--that is, the phenomenon that homeowner 
insurance rates are going through the roof.
  In addition to that, insurance companies--if they have not gone 
broke--are bailing out; they are canceling policies right and left. 
Those which are staying are canceling policies, and other insurance 
companies are canceling all of their homeowners coverage. The bottom 
line is that this is a tough time for homeowners just to be able to 
afford financially the cost of what is known as windstorm insurance.
  Now, I rise to tell the Senate about a package of bills that has been 
filed but one in particular that I suggest to the Senate is a way of 
addressing not only the pleas of our constituents back home, the pleas 
of insurance companies, the pleas of reinsurance companies, the pleas 
of insurance regulators, the insurance commissioners of the 50 States, 
but the pleas particularly of our constituents who are paying the tab. 
This is the question: Can any one insurance company or any one State 
withstand the financial losses we anticipate from the megahurricanes of 
the future? The answer to that is no. That is why they are now turning 
to the Federal level of government.
  May I say that 11 years ago, I was confronted with one of the 
toughest jobs I have ever had in a lifetime of public service when I 
was elected the Florida State treasurer, which is also the position of 
the elected insurance commissioner of Florida. I inherited the chaos in 
the aftermath of the monster hurricane, Hurricane Andrew, in the early 
1990s. It had paralyzed the insurance marketplace of Florida, not only 
in south Florida where the hurricane hit but the entire State of 
Florida, because what is happening today happened in the mid-1990s--
companies had gone broke, they were fleeing the State of Florida, and 
those which were staying were canceling policies right and left. 
Companies were asking the insurance commissioner for rate increases 
that were being hiked to the Moon. It is the same phenomenon we have 
today.
  I can tell you that we had to make up the solution as we went because 
that kind of financial impact to the insurance industry and to the 
people served by that industry had never happened. Andrew was a $16 
billion insurance loss storm. That, in today's dollars, is about a $23 
billion insurance loss storm. But what really scared the ``bejeebers'' 
out of the insurance marketplace was the realization that if the 
hurricane had turned 1 degree to the north and drawn a bead on the Dade 
County-Broward County line instead of south Dade in Homestead, a 
relatively unpopulated part of Dade County, if it turned that 1 degree 
to the north and hit that more populated area, it would have been a $50 
billion loss storm, and that would have taken down every insurance 
company that was doing business in the path of the storm--taken them 
down financially. It would have drained all of their reserves.
  That is the circumstance we have facing the States of the gulf coast 
as well as the Atlantic coast today because you put a category 4--by 
the way, remember, by the time Katrina hit Louisiana, it was only a 
category 3. Look at what it did to the Mississippi coast. If you put a 
category 4, which is winds up to 145 miles per hour, or a category 5, 
which is in excess of that, into a concentrated area of high urban 
density and you have major loss, you will have insurance companies 
going down the tubes financially.
  So what are they doing? They are coming to us. Well, the problem is 
that the Federal level of government has never dealt with insurance. It 
was back in the 1930s that the McCarran-Ferguson Act was enacted, which 
said the regulation of insurance is going to be done by the 50 States. 
And they are coming to us because of the financial enormity of loss not 
only to insurance companies but to our respective States as well. And, 
therefore, what do we do? It is hard to get consensus here because we 
don't deal in insurance matters, and it is hard to get consensus 
because the insurance industry is not unified on what to do. Certainly, 
the reinsurance industry has a different perspective than the insurance 
industry. The insurance regulators have another perspective.

  So, after consulting with my dear friend and senior colleague from 
Mississippi and with the senior Senator from Louisiana, Ms. Landrieu, 
we have filed a bill modeled after what the State of Florida had to do 
after the monster mega-hurricane in the nineties, and that was build 
consensus by forming a prestigious commission representative across the 
board of all the peoples and organizations that are affected by this 
enormous question and ask that commission, that emergency national 
commission--which is exactly what we did in Florida in 1995. We formed 
what we called then the academic task force headed by presidents of the 
universities of Florida. They reported back within 3 months.
  We took that package to the State legislature. We got the legislature 
to pass it into law. The law enabled the insurance commissioner then to 
help the insurance companies restore the marketplace at affordable 
prices so the people would have available affordable insurance.

[[Page S5771]]

  So the three of us--Senator Cochran, Senator Landrieu, this Senator--
have filed this bill setting up a national commission under law 
appointing specific designees that are a broad representation of the 
industry, of the problem, to come back to the Congress and to the 
executive branch within 90 days with their recommendation that then we 
can deliberate the work product thereof to see if we can have some 
solution as to these dire economic conditions that our people, that our 
States, and, in fact, private industry are facing as we now face 
another active hurricane season.
  I conclude by saying that we are very happy that the National 
Association of Insurance Commissioners, that organization that 
represents all 50 insurance commissioners of our States, plus the 
District of Columbia, plus the Virgin Islands, plus Puerto Rico, have 
all come together and unanimously endorsed this concept.
  We cannot get consensus here because everybody has a different idea, 
including the industry, but we can take what happened successfully in 
Florida and use that model to build consensus so that we will know what 
to do and then can pass appropriate legislation.
  Mr. President, I wanted to share this right as the winds are hitting 
the State of Florida from the first named storm of this hurricane 
season, the storm named Alberto.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Mississippi.
  Mr. COCHRAN. Mr. President, I thank the distinguished Senator from 
Florida for his initiative in bringing this issue in this form to the 
Senate. I am pleased to cosponsor the legislation with him, Senator 
Landrieu, and others who may cosponsor this legislation.
  We are reaching out to the industry and to experts in related 
business activities who have experience, a depth of understanding about 
this challenge we face to give us the benefit of their advice and their 
counsel.
  There are specific recommendations, if they can come to a consensus, 
on how Government can more responsively address this critical issue. In 
our State of Mississippi right now, there are people in limbo trying to 
decide whether they take on the burden of increased costs of insurance, 
of chances that they may not get insurance they can afford. So 
rebuilding is slow. Recovery is slow. Businesses are reluctant to 
embark upon expansion or remodeling, refurbishing, rebuilding, 
reconstructing from slabs the businesses they had in the gulf coast 
region.
  This is a real dilemma, and it is an economic challenge that no one 
State can really overcome using the resources of a State government or 
a national blue ribbon commission, such as the one brought together by 
Haley Barbour of Mississippi. Our Governor has reached out to the 
business community and individuals who have experience who could be of 
help in recovering from the disaster that hit our State.
  This is bigger than one State, bigger than our State's commission 
that Governor Barbour has appointed and that is working hard and making 
a big difference and making us believe that we can recover, and we will 
recover. That is a very important part of this situation and this 
challenge.
  I think this is a very important step to take, and it comes at a time 
when we have laid before the Senate now a conference report making 
supplemental appropriations to the Departments of State and Defense for 
the war on terror, but as far as our current domestic challenges are 
concerned, $19 billion to help sustain the recovery and rebuilding that 
is underway, recovering from Hurricanes Katrina and Rita that were so 
devastating to our gulf coast region.
  Mr. President, I commend the Senator.

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