Insuring Protection for Homeowners if Disaster Strikes

To the dismay of many experts, the U.S. continues to be unprepared for and unprotected from a financial disaster should a Katrina-like natural catastrophe hit the country.

According to a coalition of first responders and catastrophe experts, the solution rests in the enactment of a comprehensive catastrophe protection plan such as that envisioned in the Homeowners Defense Act of 2010.

The co-chair of ProtectingAmerica.org stated that when it comes to enhancing the financial system that sits behind homeowners, communities and insurers, we are in no better shape than we were when Katrina hit in 2005. As he sees it, given the present economical issues the U.S. is dealing with, things may be worse off than they were five years ago.

As it turns out, the country is actually exposed and vulnerable to major economic consequences unless officials take steps right away to prep for the next major natural catastrophe.

Another co-chair with ProtectingAmerica.org believes that a major hurricane making landfall near any of the country’s major urban centers from New York to Houston would lead to tremendous loss of life and significant damage to both homes and businesses. He adds that the $26 billion taxpayer bailout that came after Hurricane Katrina would be quickly consumed by such an event.

Both co-chairs claim that the present financial model for catastrophe recovery is a retrospective, after-the-fact, model that relies at first on insurers and reinsurers to cover the initial level of losses after a major event, but ultimately is reliant on federal taxpayers to pick up the rest of the bill.

ProtectingAmerica.org has been seeking enactment of the Homeowners’ Defense Act of 2010 (HR 2555), a bill that would form a privately funded public partnership to assist the pre-funding of financial costs of a large-scale natural catastrophe.

If enacted, the program would facilitate the risk participation of the private sector, increase the availability and sustainability of the catastrophic insurance system and offer potent incentives for residential property owners to undertake CAT loss mitigation efforts.

As the co-chairs see it, this move should add capacity, add to stability and decrease consumer costs.

From an economic perspective, such an alliance of public and private resources is the optimal method with which to address the inefficiencies that interfere with the present system of federal disaster relief.

The Homeowners’ Defense Act was given the go-ahead by the House Financial Services Committee back in April with bipartisan support. The bill was awaiting action by the entire House of Representatives.

The co-chairs noted that five years is a long time to be waiting for a comprehensive program to address the national need for a program to prepare and protect homeowners, communities and the taxpayers.

The co-chairs are also hoping that Congress would reflect on the fifth anniversary of Hurricane Katrina and act soon before the next catastrophe hits.

If not, it could be tougher times ahead for homeowners.