On May 21, 2009, Representative Ron Klein (D-FL) introduced the Homeowners’ Defense Act of 2009 (H.R. 2555), which would provide federal support for state-sponsored insurance programs created to assist homeowners in the event of natural catastrophes. Senator Bill Nelson (D-FL) introduced the Senate version of the bill (S.505) on February 27, 2009. Rep. Klein reintroduced the bill this year after it died in the Senate in 2008. The bill, referred to the House Financial Services Committee, currently reflects 56 cosponsors from over 25 states.The bill would create a National Catastrophe Risk Consortium, a nonprofit consortium of states that have reinsurance funds for natural disasters not covered by private insurance. It would pool the risk from hurricanes and other disasters to reduce premiums. The bill authorizes the Secretary of Treasury to guarantee debt issued by eligible state programs assisting in financial recovery from natural disasters and to make reinsurance coverage available for purchase to those programs. It also authorizes grants for eligible programs to prevent and mitigate losses from natural catastrophes.
Proponents of the bill believe it will lower premiums for homeowners in participating states, expand the market for private insurance, and reduce the overall cost of responding to natural disasters. Critics, however, express concern that the bill would encourage development in high risk or environmentally sensitive areas, undermine the private market, and leave taxpayers on the hook for liabilities and commitments reflected in the bill. Rep. Klein has stated that he believes the bill now has stronger support in the Senate and that President Obama also has signaled his support for the legislation.