Developing federal issue

The idea of a federal catastrophe program has been getting mixed reaction in Washington.

The Bush Administration and key Republicans including Sen. Richard Shelby, R-Ala., have outright opposed the idea, which has among its supporters the Republican governor of Florida, Charlie Crist.

Rep. Barney Frank, D-Mass., the new chairman of the House Financial Services Committee, has expressed his support for a national disaster program.

“It is clear that the government has got to step in,” said Frank last month at a press conference where he was flanked by Rep. Ginny Brown-Waite, R-Fla., and Rep. Carol Maloney, D-N.Y., who are advocating a federal role.

But Senator Chris Dodd, D-Conn., who now chairs the other committee that weighs in on insurance matters, the Senate Committee on Banking, Housing, and Urban Affairs, and who is running for his party’s nomination for president, is being more cautious. The senator from the insurance state has said that the issue of protecting and insuring against natural disasters is a “national problem” and that states in disaster regions “cannot be expected to shoulder the burden alone, given the magnitude of the losses that have occurred over the past few years, and that may occur in the years to come.”

However, Dodd has stopped short of backing a federal program. Instead he has supported creation of a study commission of insurance experts and other leaders to make recommendations to Congress on what national action, if any, would be appropriate.

Sen. Bill Nelson, D-Fla., and Sen. Mel Martinez, R-Fla., have already filed legislation to create such a commission.

Dodd also proposed several actions which could help in the short-term: $100 million in tax deductions on premiums for homeowners in disaster-prone areas; a $100 million federal investment fund for businesses and homeowners to mitigate against the risk of damage caused by a national catastrophe; and a financial strengthening of the National Flood Insurance Program.

The fact is that Americans continue to build in and move to hurricane-prone communities at a rapid pace. According to Dr. Robert Hartwig, president and chief economist for the Insurance Information Institute, 15 new condominium projects, with a total of more than 2,100 units, will be completed by year-end 2009 in South Miami Beach, Fla. Rapid build-ups are also going on in Galveston Island, Texas; Hilton Head and Myrtle Beach, S.C.; the Maryland shore; eastern Long Island; and Cape Cod, Mass. and other areas as well.

While a national commission might be a sensible approach, neither the real world nor the weather waits for government reports. Ongoing real estate development along with Mother Nature will likely have more effect on the future availability and cost of property insurance than anything Washington eventually comes up with.