Homeowners' Defense Act of 2007

HOMEOWNERS' DEFENSE ACT OF 2007 -- (Extensions of Remarks - November 15, 2007)

[Page: E2450]

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SPEECH OF
HON. MAXINE WATERS
OF CALIFORNIA
IN THE HOUSE OF REPRESENTATIVES
THURSDAY, NOVEMBER 8, 2007

The House in Committee of the Whole House on the State of the Union had under consideration the bill (H.R. 3355) to ensure the availability and affordability of homeowners' insurance coverage for catastrophic events:

* Ms. WATERS. Mr. Chairman, I would also like to thank Mr. Klein and Mr. Mahoney for their leadership in authoring this bill.

* Too well, we all remember the aftermath of Hurricane Katrina and the resulting confusion families encountered about their insurance coverage or lack thereof. Well, imagine if a hurricane were to go through a state and only 1 in 8 homeowners were covered by an insurance policy. Unfortunately, this is exactly the situation that exists in California today--only 1 in 8 (or 12 percent) of Californians possess earthquake insurance. At the time of the Northridge earthquake in 1994 almost three times as many people were covered. After the Northridge earthquake, the cost of the coverage doubled and the amount of coverage provided was cut in half.

* The California Earthquake Authority (CEA)--created after the Northridge earthquake when insurers restricted homeowners' insurance policies in order to avoid earthquake exposure--currently provides about two-thirds of the residential insurance coverage in California. Since its inception 11 years ago, CEA has been unable to accumulate the amount of capital it projects it will need in the event of a catastrophic earthquake. This year approximately 40 percent of the premium that CEA collects from policyholders will be paid to re-insurers rather than towards capital accumulation or more coverage under the policy.

* Including the CEA in the benefits provided under H.R. 3355 will allow it to reduce its claims-paying financing costs while still being able to pay the cost of its losses and repay any reinsurance or loans from the Federal government. By reducing its claims paying costs CEA will be able to accumulate capital faster and encourage more people to buy earthquake insurance.

* Inclusion of the CEA in H.R. 3355 makes good economic sense, good actuarial sense, and good common sense. I urge my colleagues to support the Manager's Amendment and the underlying bill before us today.

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