Financing Catastrophic Risk: Summary of the Homeowners' Defense Act of 2009 (S. 505 and H.R. 2555) [June 1, 2009]   [open pdf - 281KB]

"In the aftermath of Hurricane Katrina in 2005, the demand for homeowners' insurance in Atlantic and Gulf Coast states has outpaced supply, leaving policymakers and insurance regulators struggling to find ways to enhance insurer capacity to underwrite business in catastrophe-prone areas. [...] Insurers and policymakers are now pursuing alternative forms of risk transfer, such as securitization. [...] On February 27, 2009, Senator Bill Nelson introduced the Homeowners' Defense Act of 2009 (S. 505) that would establish a non-profit corporation, the National Catastrophe Risk Consortium... [...] On May 21, 2009, Representative Ron Klein introduced a similar measure (H.R. 2555), in terms of the Consortium... Proponents of a national catastrophe financing facility maintain that such a mechanism would: (1) facilitate the flow of private capital to state-sponsored insurance facilities; (2) expand private sector capacity to write business in exposed areas; and (3) stabilize the property insurance market following significant catastrophes. Critics, on the other hand, maintain the Consortium would encourage states to unnecessarily create catastrophe funds in order to access federal catastrophe risk reinsurance. Moreover, critics conclude that states are already free to pool risks and access the capital markets and, therefore, a federal program is not necessary. This report will be updated as events warrant."

Report Number:
CRS Report for Congress, R40680
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