U.S. group pans proposed bill to create a national catastrophe fund

New Jersey Congressman Albio Sires has reintroduced legislation to support the creation of a national catastrophe fund, a move that was quickly and strenuously criticized by SmarterSafer.org, a coalition of insurers and environmental groups.

The Homeowners and Taxpayers Protection Act of 2013 “changes how we pay for natural catastrophes from an after-the-fact emergency appropriation system to a planned, controlled approach,” Sires, congressman serving the 8^th district of New Jersey, said in a statement. 

“It is clear that we need a better way to provide relief funding without burdening taxpayers or stretching the federal budget,” he emphasized. “With the recent events of Superstorm Sandy, my state and my region in particular know the devastation these large-scale natural catastrophes bring to our citizens.”

Pre-funding, exclusively from private sector financing, would be required for catastrophe losses to construct a backstop of accessible funds for when such devastating events occur, notes the press statement. The idea is that the legislation “would drive down the cost of insuring all Americans, including those who live in areas with major catastrophe risk and encourage many more homeowners to be covered,” the statement adds.

The reserve fund created through the proposed legislation would also provide advanced funding to enable local public safety and emergency management organizations to enhance protection, improve planning, and mitigate the damage from natural catastrophes by enhancing building codes, land use planning, first responder training, equipment upgrades, and general consumer education.

The move was swiftly and strenuously criticized by SmarterSafer.org. The group argued creating a national catastrophe fund would put taxpayers on the hook for billions of dollars in losses, encourage risky development in environmentally sensitive areas, and do nothing to protect people and property in harm’s way.

“A federal backstop for disaster insurance replaces private-sector insurance with the American taxpayer,” notes a statement from SmarterSafer.org, further arguing that it would “displace private property and casualty insurance with a costly federal reinsurance scheme.”

SmarterSafer.org contends that the bill “would encourage people to build and rebuild homes in hurricane-prone, environmentally sensitive areas by creating programs that subsidize homeowner’s insurance.” Such legislation would add significant new taxpayer obligations that would do little to disincentivize the risky behaviours that exacerbate the impact of major climate events.