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Committee on Financial Services

United States House of Representatives

Archive Press Releases

July 12, 1999


Today, we meet to hear testimony on homeowners’ insurance availability in disaster-prone areas and solutions to offer Federal reinsurance where the private markets are failing.

Before we begin, let me pay special recognition to the Vice-Chairman of the House Banking Committee, Representative Bill McCollum, for inviting the Subcommittee to Florida, and for his leadership to protect families in Florida and across the country from the devastating losses associated with natural disasters.

Seven years ago, one of the most destructive hurricanes in the history of our country left more than 125,000 homes destroyed or damaged in Florida. Hurricane Andrew shocked the Nation, and its impact, both psychological and financial, is still felt by many.

Since Hurricane Andrew, there continue to be stories of families unable to obtain homeowners’ insurance. In the worst cases, families are left unprotected from catastrophic loss. The risk to homeowners will only increase as experts predict a prolonged siege of more frequent, more forceful storms. More destructive storms coupled with population and development in coastal areas mean that disasters resulting in multi-billion losses will become increasingly common. In the last 15 years alone, natural disasters have cost taxpayers almost $80 billion.

Americans see on the news the destruction that hurricanes cause and some of the rebuilding efforts. But they often do not see the long-term instability of the affected communities. They may not understand the insecurity residents feel when insurance for their homes, the center of their lives, becomes unavailable. Insurance cannot prevent disasters, but it can help families and neighborhoods put their lives back together after one strikes.

Where the private sector has been unable or unwilling to provide the amount of insurance needed, Florida and some other states have stepped in to help protect their residents. But even a state as large as Florida is limited in what financial guarantees it can make without endangering the state economy. At that point, there is a role that the federal government can play.

Washington cannot and should not solve the problem directly. Insurance is best regulated at the state level, where the unique needs of a community are better understood. State responses will be adequate to handle the typical storm or earthquake. However, no state program is able to handle the worst case scenario, a disaster with losses of $50 billion or more.

Before our Committee is legislation designed by Representative McCollum and I that would encourage greater private market participation in disaster-prone areas, and provide states additional protection against losses from mega-catastrophes. Our proposal passed the House Banking Committee in the 105th Congress with a wide margin of bipartisan support, including that of then Deputy Secretary of the U.S. Treasury, Larry Summers.

It is our intention to consider the legislation again in Committee this September or sooner, and hope to pass the bill out of the House of Representatives early this Fall.

Mr. McCollum.


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