Wes Hickman (202 224-5972) or Kevin Bishop (864 250-1417)
Home owners along South Carolina’s coast are closely watching the path of Hurricane Isabel to see where she will make landfall. Hurricanes of this magnitude usually do terrible damage costing millions of dollars and countless hours of cleanup and repairs. The effects of a powerful hurricane such as Isabel will probably be felt years after the storm has passed.
One lasting effect felt by homeowners long after the cleanup is over, is the lack of affordable insurance. Often times after a natural disaster, insurance companies will pay homeowner claims and then make a business decision to not renew or issue new policies in an area fearing another catastrophic event.
U.S. Senator Lindsey Graham (R-South Carolina) today sought to alleviate this problem by introducing legislation to create a federal backstop for catastrophic risk insurance coverage. The legislation would ensure the availability of affordable homeowners insurance in areas like the South Carolina coast that are at risk from major natural disasters.
“Natural disasters have the potential to create significant insolvency in the insurance industry and keep affordable property and casualty coverage out of reach for many American homeowners,” said Graham. “Homeowners along South Carolina’s coast and elsewhere should not be punished. We need to help insurance rates stay low enough to ensure all Americans can purchase the insurance they need to protect their families.”
The bill divides the country into six regions. When an earthquake, hurricane or typhoon occurs in one of these areas, the U.S. Treasury Department would auction off reinsurance coverage to private and state insurance carriers in the region. This federally backed coverage would be cheaper than reinsurance coverage offered by private providers.
Graham noted the bill allows private insurers, reinsurers, and capital market companies to participate in these auctions.
“This bill will create competition in the reinsurance market,” said Graham. “Competition is good for consumers because it lowers prices and improves the product.”
The program will require a one-time government outlay of $2 million. Afterward, it will be self-sustaining, operating on the proceeds from the auctions and investments.