Introduction of the District of Columbia National Disaster Insurance Protection Act

Floor Speech

Ms. NORTON. Madam Speaker, I rise today to introduce the District of Columbia National Disaster Insurance Protection Act. This bill amends federal law to exempt from federal income taxation catastrophic insurance reserves and the investment income derived from such reserves if held by insurance companies in the District of Columbia. Under current federal law, these funds are subject to federal income taxation, which has led property and casualty insurers to hold billions of dollars in reserves, either directly or indirectly through reinsurance, in foreign jurisdictions, such as the Cayman Islands and Bermuda, where they are not subject to U.S. income taxation.

This bill serves important national purposes. This bill will help protect individuals and businesses with property and casualty insurance across the country, as well as U.S. taxpayers. Today, if a catastrophe occurred in the U.S. but foreign insurance companies did not pay the claims, U.S. taxpayers likely would be on the hook for the claims. In fact, after the September 11, 2001 terrorist attacks, the U.S. Government had to establish a federal backstop for losses related to terrorist attacks, the Terrorism Risk Insurance Act, which is still in place today. As the recent financial crisis showed, the U.S. Government has a strong interest in preventing systemic financial risks. Transparency, for example, is a major feature of the pending Wall Street reform bill, but there is little transparency in the catastrophic insurance market, posing a risk to the U.S. economy and taxpayers. Instead, individuals and businesses must rely on small foreign jurisdictions to preserve and protect catastrophic insurance reserves.

I chair the subcommittee that has primary jurisdiction over disasters. Since 9/11, we have plugged all of the most obvious holes in U.S. security. There is no reason to leave the funds necessary to recover from disasters offshore. By locating these funds in the nation's capital, the most protected and secure city in the U.S., Congress would be shoring up an existing but overlooked security vulnerability.

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