Urges House Financial Services Committee to Vote Against Federal Bailout of Florida Beach Houses

(Washington, DC) – today urged a House Financial Services Committee to vote against opposes legislation, H.R. 2555, introduced by Rep. Ron Klein (D-FL) when it is scheduled to be considered on Tuesday, April 27, 2010.   The coalition said it would cost taxpayers billions of dollars, discourage the insurance and reinsurance private market and result in incentives to build in unsafe and environmentally fragile areas.  Instead, it encourages the passage of several mitigation bills that would better protect homeowners and save taxpayer money.

“The Homeowners’ Defense Act is a bad idea.  With sea levels rising and climate scientists predicting more intense hurricanes in the Atlantic and Gulf coasts, providing new incentives for coastal development in Florida is the last thing the federal government should do,” said Ed Hopkins, Director of Sierra Club’s Environmental Quality Program.  “Instead, protecting natural buffers and helping to make homes and communities more resistant to hurricane risk is a better role for government.”

“The Beach House Bailout is probably the worst idea with serious support in this Congress. It would impose a multi-billion dollar liability on taxpayers, endanger lives, and damage the environment. It cannot be improved. Congress needs to reject it outright and the federal government needs to stay out of the reinsurance business,” said Eli Lehrer, National Director, Center on Finance, Insurance and Real Estate of the Heartland Institute.

“This legislation is all about shifting cost and responsibility from the bad decisions of a few onto the backs of the already overburdened American taxpayer. The Committee should reject it outright. All a federal reinsurance program would do is cement subsidies that encourage development in high risk areas rather than promoting solutions to help people out of harm’s way,” said Stephen Ellis, Vice President, Taxpayers for Common Sense.

“‘Homeowners’ Defense’ won’t likely be the result of Homeowner’s Defense Act.  Instead we’ll see a spurring of even more environmentally-damaging and high-risk coastal development, especially in Florida — a State that needs to protect and restore the very critical coastal natural resources on which much of the State’s economy depends.  This bill is more for the benefit of some big insurance companies and developers.  Setting up the U.S. taxpayers to be the backstop of unstable state catastrophe insurance funds is almost certain to result in more, not less, damage to peoples’ homes, because it fundamentally undercuts needed and vital efforts to mitigate, control and reduce hurricane and storm risks,” said David Conrad, Senior Water Resources Specialist for the National Wildlife Federation. previously sent the House Financial Services Committee a letter of opposition to H.R. 2555.   Please see excerpts from the letter below:

H.R. 2255 is a Federal Bailout Program

“H.R. 2555 creates a federal bailout program principally designed to benefit hurricane-threatened Florida at the expense of taxpayers in all 50 states.  The legislation supports a Florida system that is based on artificially low premiums.  Such a system encourages risky development behavior.  It is a cost the federal government and taxpayers cannot afford…

“We understand the significant risks that Florida faces as a result of natural disasters.  We agree that all US residents, including Floridians, should have access to adequate insurance so they can responsibly rebuild after a storm.  We oppose, however, any effort to shift the costs of insuring Florida residents to taxpayers across the United States.  The state of Florida has established a public insurance system instead of relying on the private sector.  This public system is deeply flawed.  Unlike private insurance and reinsurance, which maintain proper liquidity and reserves to pay claims, Florida’s state insurance and reinsurance funds are severely under-capitalized and will not be able to pay claims in the event of a large hurricane. …

The state of Florida is well aware that its public insurance system is flawed—under the state program, Citizens Property Insurance Corporation, homeowners who live on the coast pay only a fraction of actuarial rates.  These subsidies are not means tested—affluent homeowners with beachfront property are being subsidized by those who live in less risky, and in some cases less wealthy, areas of the state.  While Florida could make changes to ensure its system is on solid financial footing, including purchasing reinsurance or floating catastrophe bonds in the private market, the state has chosen to continue its under-capitalized system in hopes that the federal government, and all taxpayers, will bail them out…”

H.R. 2255 Will Harm the Environment
“In addition to shifting significant costs onto federal taxpayers, a fundamentally unfair and, in this era of spiraling federal deficits, a fiscally irresponsible request, H.R. 2555  encourages development in unsafe and environmentally fragile areas.  While we agree that there may be actions that need to be taken to help lower-income families afford insurance when they already live in harm’s way, subsidizing development in environmentally sensitive areas primarily benefits those who least need assistance.  Encouraging this development directly harms this nation’s residents and communities by eroding our natural barriers to storms and their impact.”

Smart Mitigation Legislation is the Answer
“…..the Financial Services Committee should focus its natural catastrophe efforts on smart mitigation legislation that helps property owners—particularly lower and moderate income families—make their homes safer. Federal efforts to strengthen state-level mitigation programs will better protect those living in at-risk areas and it gets at the root of the problem.  The Klein legislation, on the other hand, does nothing to solve the underlying issues.  Instead, it would create a system that perpetuates a flawed and costly approach.

H.R. 3026, the Hazard Mitigation for All Act, for example, was introduced by Representative Bennie Thompson of Mississippi last year and was referred to the Financial Services Committee.  H.R. 3026 recognizes that public housing, Section 8 rental units, and publicly-assisted housing all would benefit from comprehensive retrofit mitigation projects to harden them against natural catastrophes.  Such an approach is fiscally responsible because it would reduce long-term taxpayer costs by reducing the need for post-disaster reconstruction.  H.R. 3026 would provide for funding for such mitigation efforts for the benefit of those at-risk and in-need populations.

Finally, we also strongly support H.R. 3377, Disaster Response, Recovery and Mitigation Enhancement Act, which has been reported favorably by the Committee on Transportation and Infrastructure and awaits action by the House.  This vitally important legislation authorizes critical new investments in pre-disaster mitigation, would help to modernize our Nation’s public warning systems, and provides incentives to the states to adopt and enforce improved building codes. 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.

Click here to read the letter.