Congressman Sherman Pushes for Earthquake Insurance
Washington, D.C. - Today at the House Financial Services Committees hearing, Congressman Brad Sherman (D-CA) offered an amendment that would require an annual report to Congress about the ability of the private homeowners insurance market to cover natural disasters.
Sherman is a senior member of the Committee, and portions of his statement follow:
œThe Sept. 11 attack was the most expensive catastrophe in U.S. history. According to data from the Insurance Information Institute, the total insured losses were twenty billion dollars. It is important to note that the insurance industry does not come to the federal government looking for handouts or subsidies but, rather, a program that will allow us and them to cover losses should there be a catastrophe of similar size. We are doing the right thing by continuing the Terrorism Risk Insurance Act for another two years¦ probably we should be continuing it for a longer period of time.
œNatural disasters are also major catastrophes that have enormous costs, and as terrorist attacks, they are costly. They raise three questions: Will insurance be available? Can the insurance industry afford to make the payments and will they offer the insurance even after the season? The losses from the Northridge earthquake, the insured losses, were 12.5 billion, somewhat less than Sept. 11, but in the same league. And the losses from Hurricane Charley are estimated to be 6.8 billion, from Hurricane Frances, 4.4 billion - leaving two or three additional hurricanes for this season for which we do not have the estimates.
œI would point out that after the Northridge earthquake, there was considerable difficulty in persuading insurance companies to offer future earthquake insurance and that wasnt œthe big onethat we all talk about. That was the Northridge earthquake, just the biggest single natural disaster our country has faced. We could face something in California much greater. Not in terms of deaths, not in terms of the anger that affects this whole nation, but just in terms of insured losses. The hurricane season of 2004 may exceed Sept. 11, and some future earthquake, perhaps in California could exceed them both.
œIt is, therefore, important that we, at least, look at the same financial issues that are posed by this bill as they are raised by the possibility of natural disasters. Thats why the Sherman-Brown-Wade amendment would require the Secretary of Treasury to report to Congress on the capacity of the private homeowners insurance market to cover a truly catastrophic natural disaster. The Treasury would also describe the percentage of homeowners in each state with appropriate coverage and the disasters coverage, and the average cost of such coverage.
œMr. Chairman, in the year 2002, I joined you and other Committee members in asking the GAO to study the effects of natural disasters and terrorism on the insurance markets. We received a report in April 2003, and we have not had a hearing, since then, that focuses on the natural disaster side of this issue. I would hope that next year we will hold hearings and then finally mark up legislation so that our constituents that are subject to natural disasters can enjoy the same kind of protection that we are today trying to deal with when it comes to acts of terrorism.
The amendment is supported by the National Association of RealtorsÂ® and the National Conference of Insurance Legislators. It was withdrawn, after a Member raised a concern that the amendment was not germane.