It's Back: SmarterSafer.org Leads Effort To Oppose New Federal Beach House Bailout Proposal
WASHINGTON, Oct. 16, 2012 /PRNewswire-USNewswire/ -- SmarterSafer.org - a coalition of leading taxpayer advocates, environmental groups, insurers, reinsurers and others – today urged Congress to oppose a new proposal (H.R. 6477) being sponsored by Rep. Albio Sires (D-NJ) that would leave taxpayers throughout the country on the hook for billions of dollars in losses and encourage risky development regions most prone to natural disasters.
In a letter being sent to Members of Congress today, the group wrote that the proposal, "does nothing to protect people in the event of a disaster. In fact, it actually incentivizes people to live in harm's way."
Currently, the federal government pays for immediate needs, clean up, and infrastructure after a disaster through disaster assistance. Most property rebuilding, however, is paid for by private insurance. Under H.R. 6477, taxpayers would continue to pay for immediate needs and infrastructure reconstruction and on top of that would potentially pay for tens of billions of dollars in property rebuilding costs - costs now covered by private insurance.
SmarterSafer.org said such a program is ill advised and unnecessary: (1) it would add billions of dollars to the federal deficit; (2) it masks risk, providing no incentive to undertake life and property saving mitigation efforts; and (3) it encourages development in environmentally sensitive and risky areas.
In its letter, SmarterSafer.org wrote that, "Asking the taxpayers to pick up this tab when the private market place is already insuring the risk would be ill-advised at any time but it is even more egregious during this difficult fiscal environment. Under this bill, homeowner insurance in risky areas would be nationalized through a government backstop akin to Fannie Mae and Freddie Mac. Fannie and Freddie have now cost American taxpayers $180 billion and are not a model the federal government should consider replicating in this way."
According to a study by economist Robert Schapiro of a similar backstop, such a scheme could cost $200 billion. SmarterSafer.org noted that this approach contradicts Congressional efforts to cut the deficit and federal spending while replacing a robust private market with federal government insurance.
HR 6477 would provide a federal backstop for a handful of state programs (like the one in Florida) and would incentivize other coastal states to create such programs. Florida's system is under-capitalized and cannot pay claims in the event of a large hurricane. The program provides state-backed insurance at highly subsidized rates, regardless of need.
SmarterSafer.org wrote, "Subsidizing insurance coverage not only burdens taxpayers, but incentivizes people to live in dangerous areas and discourages life-saving mitigation. Underpriced insurance does not provide accurate information about risk, creating a subsidy to develop in risky areas—areas that also provide natural protection from storms. This development directly harms this nation's residents and communities by eroding our natural barriers to storms and their impact."
Mr. Sires' proposal "unnecessarily shifts resources from taxpayers in all 50 states to pay for the mistakes made in one state like Florida. Florida officials are already working to shift policies to the private sector, and to slowly phase-in actuarial sound rates," SmarterSafer.org added.
SmarterSafer.org is a national coalition made up of a diverse set of voices united to support environmentally responsible, fiscally sound approaches that promote public safety. The Coalition strongly opposes legislative proposals that encourage people to build homes in hurricane-prone, environmentally sensitive areas by creating new programs that directly or indirectly subsidize their homeowner's insurance.
(A full copy of the letter is attached.)
October 16, 2012
Dear Representative:
As a coalition of leading taxpayer advocates, environmental groups, insurers, reinsurers and others, we urge you to oppose H.R. 6477. Recently introduced by Rep. Albio Sires (D-NJ), H.R. 6477 would put your constituents on the hook for billions of dollars in losses and encourage risky development.
This bill, which has been cleverly named "the Taxpayer Protection Act" actually does just the opposite. The bill would create a federal backstop in the form of a federal reinsurance program and federal loan guarantees for insured losses now covered in the private sector. Such a program is ill advised and unnecessary: (1) it would add billions of dollars to the federal deficit; (2) it masks risk, providing no incentive to undertake life and property saving mitigation efforts; and (3) it encourages development in environmentally sensitive and risky areas.
According to a study by economist Robert Schapiro of a similar backstop, such a scheme could cost $200 billion. Asking the taxpayers to pick this tab when the private market place is already insuring the risk would be ill-advised at any time but it is even more egregious during this difficult fiscal environment. Under this bill, homeowner insurance in risky areas would be nationalized through a government backstop akin to Fannie Mae and Freddie Mac. Fannie and Freddie have now cost American taxpayers $180 billion and are not a model the federal government should consider replicating in this way.
Though the bill has been branded as helping the federal government pay for disaster costs, in fact it merely adds to taxpayer costs. Currently, the federal government pays for immediate needs, clean up, and infrastructure after a disaster through disaster assistance. Most property rebuilding, however, is paid for by private insurance. Under HR 6477, taxpayers would continue to pay for immediate needs and infrastructure reconstruction and on top of that would potentially pay for tens of billions of dollars in property rebuilding costs - costs now covered by private insurance. This contradicts Congressional efforts to cut the deficit and federal spending. This also displaces a robust private market and replaces it with federal government insurance.
H.R. 6477 is also designed to provide a federal backstop for state programs. Florida is one of only a handful of states with a state-run system. Under H.R. 6477, other coastal states would be incentivized to create programs like Florida's—a dangerous proposition. Florida officials acknowledge that their system is under-capitalized and that in the event of a large hurricane the state system cannot pay claims. This is because the program provides state-backed insurance at highly subsidized rates, regardless of need. Subsidizing insurance coverage not only burdens taxpayers, but incentivizes people to live in dangerous areas and discourages life-saving mitigation. Underpriced insurance does not provide accurate information about risk, creating a subsidy to develop in risky areas—areas that also provide natural protection from storms. This development directly harms this nation's residents and communities by eroding our natural barriers to storms and their impact.
H.R. 6477 unnecessarily shifts resources from taxpayers in all 50 states to pay for the mistakes made in one state like Florida. Florida officials are already working to shift policies to the private sector, and to slowly phase-in actuarial sound rates. They are taking the steps to move back to a private insurance system based on risk—one that collects enough premiums to pay claims without relying on American taxpayers. Such actions should be encouraged.
SmarterSafer strongly opposes H.R. 6477 because it is the wrong way to address the problems we confront with natural disasters. It does nothing to protect people in the event of a disaster. In fact, it actually incentivizes people to live in harm's way. We look forward to working with you on these important issues.
Sincerely,
SmarterSafer.org
MEMBERS
Environmental Organizations
American Rivers
Ceres
Clean Air-Cool Planet
ConservAmerica
Defenders of Wildlife
Environmental Defense Fund
National Wildlife Federation
Sierra Club
Consumer and Taxpayer Advocates
American Conservative Union
Competitive Enterprise Institute
R Street
Less Government
National Taxpayers Union
Taxpayers for Common Sense
Insurer Interests
Allianz of America
Association of Bermuda Insurers and Reinsurers
The Chubb Corporation
Liberty Mutual Group
National Association of Mutual Insurance Companies (NAMIC)
National Flood Determination Association
Reinsurance Association of America
SwissRe
USAA
Housing
National Low Income Housing Coalition
National Leased Housing Association
ALLIED ORGANIZATIONS
American Consumer Institute
Friends of the Earth
Institute for Liberty
National Fire Protection Association
Zurich
SOURCE SmarterSafer.org
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