U.S. Senator Nelson Plans to Support Federal Backstop, Additional National Insurance Legislation

Immediately following a private meeting regarding key reforms to help reduce Florida’s catastrophic risk exposure, Florida Chief Financial Officer Alex Sink and U.S. Senator Bill Nelson held a press conference today, Friday, February 27, 2009. 

Senator Nelson’s office issued the press release below with specifics on legislation he plans to support that would provide emergency federal aid to cover property loss in the event of major Florida catastrophe.  Details on additional related legislation expected to be filed are also below.

Should you have any questions or comments, please contact Colodny Fass.

Senator:  Feds should backstop Florida hurricane fund
February 26, 2009

TALLAHASSEE, Fla. – With another hurricane season fast approaching and state lawmakers looking for ways to cover a big hit, U.S. Sen. Bill Nelson is renewing a push in Congress to pass legislation that would provide emergency federal aid to cover property losses in the event of major catastrophe in the Sunshine State.

Such legislation is needed now more than ever, Nelson said today, because the state has conceded it would be billions of dollars short in its own catastrophe fund if a big hurricane hits Florida.  Tomorrow, he’s scheduled to meet at noon with Florida Chief Financial Officer Alex Sink to discuss the effort and other ways to reduce the state’s risk exposure.

The legislation comes on the eve of Florida lawmakers convening next week in the state’s capital city – reportedly still without a solution to the volatile property insurance market.  A top priority will be dealing with the shortfall in what’s called the Florida Hurricane Catastrophe Fund, which pays claims when insurance companies can’t. 

Nelson’s bill would allow the federal government to step in with loans to the state’s CAT Fund.

The legislation, sponsored in the House by U.S. Rep. Ron Klein, of Boca Raton, passed that chamber in late 2007, but was blocked in 2008 in the U.S. Senate by Republican lawmakers and President Bush threatening a veto.  Nelson said he expects less opposition from Republicans now, in part, because of the worsening economy. 

But he also said the legislation will enjoy support from the White House.  He noted he was able last year to enlist then-Sen. Barack Obama as a chief cosponsor, along with then-Sen. Hillary Clinton, who is now Secretary of State.

More specifically, Nelson’s legislation would allow multiple states to join together to help pay for each others’ disaster costs.  That’s in addition to a provision that would provide them with low-interest federal loans when damages exceed the resources of a state-run catastrophe fund. 

GOP critics have claimed it would be a taxpayer bailout of Floridians who build houses where hurricanes can destroy their property or of Californians whose houses have been burned to cinders.  But Nelson said those critics fail to see that taxpayers nationwide already are paying the staggering costs of recovery and rebuilding after natural disasters.  Consider: for Hurricanes Katrina, Rita and Wilma taxpayers have put up some $94.8 billion.

And, there’s already a federal backstop for terrorist events, he said, adding, wouldn’t it be a smart idea to also spread the risk from wind, water, wildfire and earthquake threats among those states facing enormous loss and, thus, lower the cost of insuring against such calamities?

“We need a more disciplined, structured plan for providing federal assistance following any major natural disaster,” said Sen. Nelson.

Besides the bill to establish a program to provide more protection at lower cost through a national backstop for state natural catastrophe insurance programs, which is being filed in Washington today, Nelson said other legislation will be offered this spring, including bills to:

• Amend the Internal Revenue code to allow insurance companies (other than life insurance companies) to make tax deductible contributions to a tax-exempt policyholder disaster protection fund for the payment of policyholders’ claims arising from certain catastrophic events, such as windstorms, earthquakes, fires, or floods.
• Amend the IRS code to allow individual and business taxpayers a tax credit for 25 percent of their qualified hurricane and tornado mitigation property expenditures, up to $5,000 for any taxable year. Such expenditures would include improvements to strengthen a deck attachment, improve the durability of a roof, brace gable-end walls, reinforce the connections between a roof and supporting wall, protect against windborne debris, or protect exterior doors and garages.
• Provide regulatory relief and reform for the surplus lines insurance market.  Currently, a small portion of consumers may be unable to find insurance in the traditional market, and may turn to the nonadmitted, or surplus lines market, for coverage.  This bill streamlines regulations in the surplus lines marketplace through a mix of national standards with state enforcement to create a more efficient regulatory system.  It provides a method of collecting state premium taxes for surplus lines and allocates this income to the states and adopts the National Association of Insurance Commissioner’s (NAIC) non-admitted insurance model for eligibility requirements for surplus lines carriers on a national basis.
   

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