On April 27, 2010, the Homeowners’ Defense Act of 2009, H.R. 2555 (the "Act") was passed by the House of Representatives’ Financial Services Committee by a vote of 39-26, and will head to the House floor for a full vote, although no date has yet been set. As we reported here, Representative Ron Klein (D-FL) reintroduced the Act last May. The Act would permit states to join a national catastrophe insurance pool, and would potentially reduce the cost and improve the availability of homeowners’ insurance in Florida and in other states prone to natural disasters, such as California and Kansas.
The Act proposes to create the National Catastrophe Risk Consortium, which would serve to manage a fund that states would be able to access after the state’s catastrophe fund has been depleted, thus transferring a portion of catastrophic risk. The Consortium would serve as a conduit issuer of cat bonds on behalf of participating states, but would not take actual possession of any bond proceeds.
The insurance industry’s support of the Act has been divided. The National Association of Mutual Insurance Companies (NAMIC) and the Reinsurance Association of America (RAA) have been critical of the Act, while the Independent Insurance Agents and Brokers of America (IIABA) has expressed its support.
We will continue to monitor the progress of the Act and provide updates at InsureReinsure.com.