H.R. 3125 currently awaits consideration in the House Committee on Financial Services.

The EIAA would allow well-capitalized state catastrophe-insurance programs to lower costs by allowing the federal government to guarantee bonds issued by these institutions, in lieu of purchasing reinsurance, which currently accounts for at least 40 percent of costs, the CEA says.

If enacted, the CEA maintains the EIAA would save the CEA an estimated $100 million per year and allow it to lower its rates by 20 percent, expanding earthquake-insurance coverage across the state. Additionally, it says, the legislation protects taxpayers as insurers would pay the U.S. government for its guarantee and the fee could be adjusted upward after a major disaster.

"We cannot avoid natural disasters, but we can plan ahead and take action now to protect against the inevitable. In the past, the federal government has had to deploy vast financial resources in the wake of a major disaster," Campbell says upon introduction of the House version of the EIAA. "This bill will help limit this need in the future by both making earthquake insurance a feasible option for all homeowners and setting up a system in which investors perform a role traditionally filled by the government. Expenses to federal, state and local governments would be mitigated with increased earthquake coverage at no cost to the taxpayer."

But The Heartland Institute maintains that the bill puts all federal taxpayers on the hook for billions of dollars in potential future losses sustained by the CEA.

Although not named specifically in the legislation, The Heartland Institute says, CEA is the only entity that qualifies for the "federal bailouts" (debt guarantees) the bill would require all taxpayers to provide.

Eli Lehrer, vice president for Washington, D.C. operations at The Heartland Institute and national director of its Center on Finance, Insurance, and Real Estate, harshly criticizes the bill.

He notes, "Rep. Campbell's bill is among the very worst ideas introduced in the current Congress—and that's saying a lot. It would cost taxpayers billions of dollars, displace a productive private industry and do nothing to make California consumers safer. One really has to wonder what Rep. Campbell is thinking by forwarding such a terrible idea."

Supporters of the bill include insurers Automobile Club of Southern California and Mercury Insurance Group; the California Assoc. of Realtors and the California Building Industry Assoc.; and other organizations including consumer advocates United Policyholders as well as the American Red Cross, the California State Assoc. of Counties and the California Taxpayers Assoc., according to the CEA.