Legislation establishing a national catastrophe fund has again been introduced in the House, and has again drawn the ire of perennial critics.

The legislation is known derisively amongst critics, including the reinsurance industry, as constituting a "Beach House Bailout."

H.R. 1101 was introduced in the House by Rep. Albio Sires, D-N.J., obviously in response to Superstorm Sandy, which did major damage to coastal areas in New York, New Jersey and Connecticut.

The bill was first introduced in 2007 by former Rep. Ron Klein, D-Fla., in response to the soaring cost of homeowners insurance in the state and concerns that the windstorm facility created by the state as a reinsurance system would become insolvent in the event of a major hurricane. It was introduced in the subsequent congresses until Klein was defeated in the Republican wave of November 2010.

The legislation would create a national-catastrophe fund whose purpose would be to respond to large-scale events. Private-sector funds would be used under the legislation aimed at building up enough cash as a backstop for paying claims resulting from a major weather event.

Sires said the bill would improve on Klein's initiatives The bill improves on a previous proposal sponsored by Klein by requiring exclusively private pre-funding for catastrophe losses to construct a backstop of accessible funds for when such devastating events occur. 

"As a result, this legislation would drive down the cost of insuring all Americans, including those who live in areas with major catastrophe risk and encourage many more homeowners to be covered," Sires said.

However, R.J. Lehmann, a senior fellow at the Washington think tank R Street, the federal government would ultimately be forced to guarantee liabilities from government-run property insurance schemes like the Florida Hurricane Catastrophe Fund, which currently has $17 billion in liabilities, but would be unable to make good on billions of dollars in claims if a large hurricane were to strike the state.

He said, "While federal cat-fund supporters often claim they would require participating state cat funds to charge actuarial rates to participate in the federal program, the reality is that any fund that did charge actuarial rates would not need federal support in the first place."

SmarterSafer.org also came out against the bill, saying it would "put taxpayers on the hook for billions of dollars in losses, encourage risky development in environmentally sensitive areas, and do nothing to protect people and property in harm's way."

SmarterSafer.org's members include Allianz of America, Association of Bermuda Insurers and Reinsurers, Chubb Corp., Liberty Mutual Group, National Association of Mutual Insurance Companies, National Flood Determination Association, Reinsurance Association of America, SwissRe and USAA.

However, in defense of the legislation, Admiral James Loy, ProtectingAmerica.org co-chair and former deputy secretary of Homeland Security, says, "We need to recognize that citizens living in areas most likely to be affected by natural catastrophes are disproportionately those that can least afford it. This isn't a beach-house issue or a summer vacation issue – this is an issue of fiscal responsibility that concerns primary residence homeowners across America. We need a policy to help get more people insured, to pre-fund for these events, and to reduce the enormous costs of recovery after a catastrophe."

Updated with comments from ProtectingAmerica.org.

Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader

Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
  • Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
NOT FOR REPRINT

© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.