[Congressional Record (Bound Edition), Volume 153 (2007), Part 11]
[House]
[Pages 15028-15030]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          HOMEOWNERS INSURANCE

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Florida (Mr. Bilirakis) is recognized for 5 minutes.
  Mr. BILIRAKIS. Mr. Speaker, before I begin, I'd like to wish a happy 
birthday to my son, Michael, who was born on June 7, 1993. He's 14 
years old today. What a wonderful boy he is. I'm so proud of him; great 
student, all around great person, great athlete as well. He takes after 
my father, Congressman Mike Bilirakis, who he was named after.
  Mr. Speaker, it is with great frustration and disappointment that I 
rise today. It has been 3 years since the devastating 2004 hurricane 
season that ravaged my State, which forced homeowners insurance rates 
to skyrocket to unmanageable levels. And this body, unfortunately, has 
not acted.
  Along with many of our gulf coast colleagues, I have pleaded with the 
Democrat leadership to act on legislation which might ease this 
financially crippling crisis. Of course, this body has not acted.
  Countless of my constituents have implored me to help relieve this 
crisis so they do not have to leave the areas they love. They wish to 
raise their children and retire in the great State of Florida, but they 
fear that simply it will not happen because they can't afford it. We 
must act, Mr. Speaker.
  The front page of today's Wall Street Journal forewarns of the 
impending economic emergency if we have another major hurricane here in 
the United States. The story correctly notes, and I quote, ``If 
insurers of last resort face major storm losses, those costs could 
spread to a broad cross section of the public.'' This is just another 
warning given to this Congress that something must be done immediately. 
We must act.
  Mr. Speaker, I will submit the entire article for the Record.
  One of the areas most affected by this crisis is Pasco County in 
Florida, my district. Last month, the County Commissioners passed a 
resolution calling for Congress to take action.
  Mr. Speaker, I would like to submit the entire resolution for the 
Record.
  Mr. Speaker, the following are excerpts from the Pasco resolution, 
and I quote.
  ``Whereas, the National Association of Insurance Commissioners, the 
Southern Governors Association, the Florida Legislature, as well as 
other State legislatures across the country,'' this is not just a 
Florida problem, as you know, Mr. Speaker, they ``passed resolutions 
recognizing the importance of developing additional insurance capacity 
to ensure the viability of coverage for catastrophic natural perils by 
endorsing the concept of a national disaster plan; and
  ``Whereas, Hurricanes Katrina, Rita and Wilma caused over $200 
billion in total economic losses, including insured and uninsured 
losses; and
  ``Whereas, the United States Federal Government has provided and will 
continue to provide billions of dollars and resources to help our 
Nation recover from catastrophes, and
  ``Whereas, multiple proposals have been introduced in the United 
States Congress over the past decade to address catastrophic risk 
insurance, including the creation of a national catastrophic 
reinsurance fund,
  ``Therefore, be it resolved by the Board of County Commissioners of 
Pasco County, Florida, it supports the adoption of legislation by the 
United States Congress to create a reasonably priced national 
reinsurance program that will help Americans find private insurance 
protection from natural catastrophes for their homes while reducing the 
demand on governmental resources,'' that's key, ``to assist victims 
after an event occurs.''
  This is a bipartisan issue, Mr. Speaker. I know you agree.
  Mr. Speaker, along with cosponsoring legislation to establish a 
national catastrophic fund, I introduced legislation to provide tax 
incentives for Americans to strengthen their property. Enactment of my 
bill, H.R. 913, will reduce homeowners insurance rates and could help 
save lives.
  I implore this body to act on these and other insurance-related bills 
to help Americans who are in need. I pray that it doesn't take another 
Katrina-type catastrophic event before the body heeds my request. Let's 
go to work.
  The material previously referred to by Mr. Bilirakis is as follows:

              [From the Wall Street Journal, June 7, 2007]

             As Insurers Flee Coast, States Face New Threat

                            (By Liam Pleven)

       As hurricane season gets under way, a dramatic shift in the 
     way homeowners insure against disasters could pose a big 
     financial risk in several coastal states.
       Private insurers have been fleeing the shoreline, wary of 
     costly storms and often fed up with government regulations 
     that prevent them from pushing rates higher. In more than a 
     dozen states--from Texas along the Gulf of Mexico and up the 
     East Coast to Massachusetts--an odd breed of carriers known 
     as ``insurers of last resort'' is filling the void.
       These last-resort insurers, which cover people the private 
     sector won't, issued more than two million policies to 
     homeowners and businesses in hurricane-prone states last 
     year, about twice as many as in 2001. Over that same five-
     year period, their total liability for potential claims has 
     increased roughly threefold, topping $650 billion. Meanwhile, 
     a separate federal flood-insurance program has seen its 
     liability jump by two-thirds since 2001 to just over $1 
     trillion.
       The sum effect: Much of the risk associated with hurricane 
     coverage is shifting to the broader public and away froth 
     private companies and coastal homeowners.
       It's unusual for several reasons. At a time when financial 
     markets are becoming increasingly adept at spreading risk, 
     states and the federal government are concentrating it on a 
     massive scale. The shift contrasts starkly with the federal 
     government's effort to make individuals assume more risk and 
     costs in other areas, such as retirement and health-care 
     plans.
       Last-resort insurers are created by state governments, 
     although they operate much like other insurance companies. 
     Many of them are set up as associations, which actually write 
     policies that cover hurricane damage from wind, among other 
     standard threats. Any insurer that sells property insurance 
     in the state must also be a member of the association.
       But these insurers also differ in significant ways. They 
     often don't have deep financial reserves, leaving other 
     private insurers, and sometimes taxpayers, to help foot the 
     bill for huge claims.
       In a catastrophic situation, for instance, the associations 
     are often authorized to impose assessments on all their 
     member insurers. That can translate to rate increases or 
     surcharges for policyholders throughout the state--not just 
     in places hit by a storm. And after recent hurricanes in 
     Florida and Louisiana, lawmakers tapped state coffers--and

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     hence taxpayers--to help defray losses incurred by last-
     resort insurers.
       The system ``shifts the risk literally from those who are 
     most at risk . . . to individuals who are at less risk or 
     even at no risk,'' says Robert Hartwig, president of the 
     Insurance Information Institute, an industry trade group that 
     plans to release a report detailing the growth of last-resort 
     insurers.
       States have a strong economic incentive to make coverage 
     available, since most banks require insurance before they 
     write a mortgage. If policies are tough to obtain, states 
     could miss out on the revenue that comes with development--
     particularly on choice coastal property. Moreover, the states 
     face political pressures from homeowners who want to be sure 
     they have affordable insurance.
       The government's role in homeowners insurance has long been 
     a hodgepodge. Each state has its own regulator which 
     typically sets or approves the rates insurers can charge.
       Many insurers of last resort were established starting in 
     the late 1960s, when urban riots led private insurers to shun 
     some inner-city properties. Today, they cover a broad 
     spectrum of homes. Generally, they aren't backed by state 
     budgets.
       While the rates charged by last-resort insurers can be 
     high, they're generally not steep enough to invite 
     competition from private insurers.
       ``There's no competition anymore,'' says Melanie Tringali, 
     whose second home about half-a-mile from the water on Cape 
     Cod is covered by Massachusetts' insurer of last resort, the 
     Massachusetts Property Insurance Underwriting Association. 
     Ms. Tringali switched in 2005, after her insurer told her 
     agent it was no longer writing policies on the Cape. Ms. 
     Tringali says the 1,000-square-foot house costs about $1,300 
     a year to insure.
       Massachusetts hasn't been hit by a major hurricane since 
     1954. But in the wake of severe storms elsewhere, some 
     forecasters believe that could change. Companies that build 
     computer disaster models say the losses could be enormous, 
     which has frightened many private insurers all along the 
     Eastern seaboard. On the Massachusetts coast, private firms 
     such as Hingham Group and Quincy Mutual Fire Insurance Co. 
     are cutting back.
       As a result, some 43 percent of homeowners on Cape Cod and 
     nearby islands are now covered by the Massachusetts 
     association. It issued more than twice as many policies last 
     year as five years prior, and its liability more than 
     quadrupled, to $92 billion.
       Insurers of last resort in other states have seen similar 
     growth. In Texas, liability almost tripled. In North 
     Carolina, it quadrupled. In Rhode Island, it was up sixfold.
       A severe storm in Galveston, Texas, site of a deadly 1900 
     hurricane, could cost the Texas Windstorm Insurance 
     Association, the state's insurer of last resort, as much as 
     $8 billion, officials there say. The association and its 
     member insurers would be able to cover about $700 million in 
     losses. Beyond that, it would need to ask all its member 
     insurers--even those who don't write coastal coverage--to 
     make up the huge shortfall. If insurers did have to chip in 
     at that point, they would be permitted to recoup the funds 
     through years of tax credits--a potentially big hit on the 
     state budget.
       ``It's scary as hell,'' says James Elbert, an independent 
     insurance agent who recently retired as chairman of the 
     association's board.
       The current situation represents a reckoning for years when 
     states saw extensive waterfront growth, due in part to low 
     insurance premiums. For a three-decade stretch starting in 
     the early 1970s, private insurers were writing policies more 
     or less freely along the water and relatively few major 
     storms hit. Coastal development boomed.
       Florida offers a glimpse into what could happen down the 
     road. In the wake of recent storms that prompted many 
     insurers to limit their exposure, the state's last-resort 
     insurer is growing--and assuming more risk.
       When the 2004 and 2005 hurricanes slammed its coast, the 
     state's insurer of last resort, Citizens Property Insurance 
     Corp., suffered heavy losses. It hit its own policyholders--
     and eventually even those insured by other companies in the 
     state--with $2.7 billion in premium surcharges. Florida 
     legislators also allocated $715 million to hold down fees.
       Since last year, Citizens has continued its massive 
     expansion, writing roughly 15,000 to 20,000 new policies a 
     week. As a result, it could be on the hook for significant 
     losses if major storms roll in. A direct hit on Miami could 
     cost tens of billions of dollars, much of which would be 
     borne by Citizens--now the largest property insurer in the 
     state.
       Some believe the federal government might be called upon in 
     the event of severe losses. Washington is already taking on 
     additional risk through the National Flood Insurance Program. 
     Under that program, insurance agents sell special government-
     backed policies that cover water damage from floods, 
     including from hurricanes. (Flood damage is generally 
     excluded from policies issued by private insurers, which 
     typically only cover wind damage from storms.)
       Last year, the number of federal flood-insurance policies 
     rose by 12 percent from 2005, when Katrina hit, mostly due to 
     double-digit growth in hurricane-prone states such as 
     Mississippi, New York, Louisiana and Texas.
       Tom Lasater, a retired high-school principal in Galveston, 
     has separate insurance policies to cover both flood and wind 
     damage. He's got reason for caution. In 1900, a storm drove 
     tides 8 to 15 feet high and inundated Galveston.
       Today, Mr. Lasater pays about $1,000 a year for $225,000 
     worth of wind coverage from the Texas Windstorm Insurance 
     Association on his two-story brick house, which he says is 13 
     feet above sea level and sits behind a 14-foot-high seawall. 
     His former insurer said it would not renew his policy after 
     Hurricane Rita ravaged the area in 2005. With the windstorm 
     association, he says his premium is lower, though he'll have 
     to pay more out of pocket through his deductible before 
     coverage kicks in.
       As for flood insurance, Mr. Lasater says he pays roughly 
     $200 a year for his policy from the federal program. He says 
     he only decided to buy it after Hurricane Katrina, when he 
     saw insurers trying to deny claims by arguing that damage was 
     caused by water, not wind. ``It was affordable, and I 
     figured, `Why take a chance?''' he says.
       A number of states, including Texas, are concerned about 
     what could happen if their last-resort insurers face a 
     significant deficit. Like officials in Florida, lawmakers in 
     some states are also facing deep public anger about the 
     rising cost of insurance on the coast.
       ``There's a catastrophe playing out with my constituents,'' 
     says Robert O'Leary, who represents much of coastal 
     Massachusetts in the state Senate. The private market, he 
     says, ``is sort of shriveling.''
       In South Carolina, the state's insurer of last resort has 
     seen its liability nearly triple since 2001. The insurance 
     commissioner, Scott Richardson, backed a plan to eventually 
     lure more private insurers to the coast. A former insurance 
     agent in Hilton Head, S.C., Mr. Richardson argued that 
     premiums charged by the last-resort insurer were typically 
     too low. Yesterday, state lawmakers approved legislation that 
     will require the insurer to charge ``adequate'' rates.
       The legislation also gives tax credits to insurers that 
     offer wind coverage on the coast. That could cost the state 
     budget $6 million to $10 million, and possibly more, Mr. 
     Richardson says. ``If it makes a company go in and write 100 
     policies in Charleston, it's worth it,'' he says.
                                  ____


                         Resolution No. 07-214

       By the Board of County Commissioners; A Resolution by the 
     Board of County Commissioners of Pasco County, Florida, 
     Supporting the Adoption of Legislation by the United States 
     Congress for a National Disaster Plan to Provide a 
     Comprehensive Legislative Solution to the Problems Presented 
     by Natural Catastrophic Exposures for the Benefit of all 
     Americans.
       Whereas, several entities including the National 
     Association of Insurance Commissioners, the Southern 
     Governors Association, the Florida Legislature as well as 
     other state legislatures have passed resolutions recognizing 
     the importance of developing additional insurance capacity to 
     insure the viability of coverage for catastrophic natural 
     perils by endorsing the concept of a national disaster plan; 
     and
       Whereas, there have been significant insurance and 
     reinsurance shortages, resulting in dramatic rate increases 
     for consumers and businesses, and significant disruptions in 
     the availability of catastrophe insurance around the country; 
     and
       Whereas, Hurricanes Katrina, Rita and Wilma, which struck 
     the United States in 2005, caused over $200 billion in total 
     economic losses, including insured and uninsured losses; and
       Whereas, the United States Federal Government has provided 
     and will continue to provide billions of dollars and 
     resources to help our nation recover from catastrophes, 
     including hurricanes, tornadoes, earthquakes, blizzards and 
     other disasters, at huge costs to Amerian taxpayers; and
       Whereas, the United States Federal Government has a 
     critical interest in ensuring appropriate and fiscally 
     responsible risk management and pre-planning for catastrophes 
     through measures such as mitigation and improved building 
     codes; and
       Whereas, multiple proposals have been introduced in the 
     United States Congress over the past decade to address 
     catastrophic risk insurance, including the creation of a 
     national catastrophic reinsurance fund and the revision of 
     the Federal tax code to allow insurers to use tax-deferred 
     catastrophe funds.
       Now, therefore, be it resolved by the Board of County 
     Commissioners of Pasco County, Florida, in regular session, 
     duly assembled, that said Board hereby supports the adoption 
     of legislation by the United States Congress to create a 
     reasonably priced national reinsurance program that will help 
     Americans find private insurance protection from natural 
     catastrophes for their homes while reducing the demand on 
     governmental resources to assist victims after an event 
     occurs.
       Done and Resolved this 8th day of May, 2007.

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