Friday, May 22, 2009


Leigh Ann Pusey, president of the American Insurance Association (AIA) this week expressed support for legislation introduced that would grant additional pre-disaster mitigation funding to local and state authorities to provide resources for enactment and enforcement of state-wide building codes.

“Every year following a natural disaster, the federal government and the private sector invest billions of dollars in disaster relief to rebuild communities,” said Pusey. “By taking action before the catastrophe, homeowners, federal and state governments can mitigate losses with the adoption and enforcement of building codes.”

Introduced by Rep. Lincoln Diaz-Balart (R-FL) and Rep. Michael Arcuri (D-NY), H.R. 2592 improves upon the current mitigation programs in the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). First, in the Hazard Mitigation Grant Program (HMGP), states that adopt and enforce state wide building codes would be eligible to receive additional funding from the HMGP after a disaster occurs. Secondly, it amends the Pre-Disaster Mitigation Grant Program (PDM) to allow states to use PDM funds to building code enforcement programs prior to a disaster.

Pusey voiced concerns, however, over different legislation that was introduced by Rep. Ron Klein (D-FL), entitled the Homeowners' Defense Act of 2009. The legislation would establish a National Catastrophe Risk Consortium and create federal bailout for inadequate state catastrophe funds.

“While well intentioned, the bill falls short in trying to address the problems in coastal insurance markets. It will not generate new capacity, reduce the cost or improve the availability of homeowners’ insurance,” said Pusey. “In fact, it is likely to encourage states to create thinly financed, state-run reinsurance facilities that will displace the private market and require a federal government bail-out in the event of a catastrophe.”

“The private insurance system continues to be well-positioned to manage natural catastrophe risk, and the best course is to improve, not displace, the private sector’s ability to serve homeowners and businesses that could face losses from natural catastrophes,” concluded Pusey.