Posted: 9/9/2008

Natural Disaster Issues Reach National Stage

As we enter the middle of the 2008 hurricane season, the United States has already suffered from one hurricane, Gustav, and one tropical storm, Hanna, making landfall. According to meteorologists, we may see more hurricanes in the not-too-distant future, with Hurricane Ike and Tropical Storm Josephine still on the horizon.

The issue of natural disasters is a very serious issue and the discussion of how to best address the issue has shifted from the local level to the national level. As the country has just wrapped up the National Democratic and Republican conventions, the issue of natural disasters was a priority. The Democratic Party approved as part of its platform for the coming presidential election, a call for the creation of a national catastrophe fund. The Democrats will also work to prevent future catastrophic response failures, whether the emergency comes from hurricanes, earthquakes, floods, tornadoes, wild fires, drought, bridge collapses, or any other natural or man-made disaster.

The Republican Party platform recognizes the need for a natural disaster insurance policy. It further states that state and local cooperation is crucial, as are private relief efforts, but Washington must take the lead in forging a partnership with businesses to ensure that FEMA’s Emergency Operations Centers run as smoothly.

Earlier this year, Arizona Sen. John McCain, Republican presidential nominee, surprised many when he opposed the creation of a federal backstop for natural disasters and suggested that the Federal Emergency Management Agency was a form of insurance. McCain said that those states threatened by severe storms should form regional alliances to protect themselves and not attempt to spread the risk to other inland states.

At the Congressional level, Florida Democratic Reps. Ron Klein and Tim Mahoney introduced H.R. 3355, the Homeowners Defense Act, which would provide federal support for state-sponsored insurance programs to help homeowners prepare for and recover from damages caused by natural catastrophes, and promote the use of private-market capital as a means to insure against such catastrophes. The legislation would also allow states that participate to purchase reinsurance through a national catastrophe fund, which would pay in a one-in-200-year event. The legislation passed the House in November 2007 by a vote of 258-155.

Just prior to the Florida Democratic presidential primary, Sen. Hillary Clinton, D-N.Y., joined by Sen. Bill Nelson, D-Fla., introduced companion legislation, S. 2310. The possible intent was to help garner votes from Floridians who are facing availability and affordability issues. However, since introduction there has been no legislative movement or debate on the issue.

Lawmakers from inland states have opposed the creation of a national catastrophe fund because they do not want their constituents to pick up the tab for those individuals that choose to live along the coast. Also, the Bush administration has threatened to veto any legislation such as the Klein-Mahoney bill, saying that it would disrupt the private market.

NAMIC does not support legislation such as the Klein-Mahoney legislation because the legislation is not consistent with the NAMIC Natural Disaster Statement of Principles. NAMIC believes that the legislation would incentivize more states to create risky catastrophe plans similar to Florida, increasing the federal government’s financial exposure. NAMIC and the Natural Disaster Task Force will continue to study how to best address natural disasters and the issue of mega catastrophes.

Direct questions to NAMIC Senior Federal Affairs Director Marliss McManus.