TAXPAYER WATCHDOG GROUP URGES DEFEAT OF HOMEOWNER'S INSURANCE LEGISLATION | Citizens Against Government Waste

TAXPAYER WATCHDOG GROUP URGES DEFEAT OF HOMEOWNER'S INSURANCE LEGISLATION

Press Release

For Immediate ReleaseContact: Jim Campi or Aaron Taylor
October 19, 1999(202) 467-5300

(Washington, D.C.) -- At the National Press Club today, the Council for Citizens Against Government Waste (CCAGW) joined a coalition of taxpayer, environmental, homeowner, and consumer groups in opposition to the Homeowner’s Insurance Availability Act (H.R. 21).  CCAGW President Thomas A. Schatz issued the following statement prior to the news conference:

“While the intent of providing adequate insurance reserves for future catastrophic disasters is laudable, the Homeowner’s Insurance Availablity bill is the wrong approach.  Instead of creating another government program under the thumb of partisan political appointees, current federal tax law should be reformed to allow private insurers to compile their own reserves.

“The bill would create an enormous unfunded liability for American taxpayers.  The idea that government can maintain a reserve account full of cash to cover a future catastrophe is fiction.  The government cannot save money; it can only spend it.  If a large catastrophic event were to occur and the low 'triggers' in H.R. 21 were met, payments from the federal government would either come from that year’s tax revenue or deficit spending.  Unlike the government, the private sector can accumulate capital reserves.

“Despite the current tax law’s bias against the accumulation of reserves, the private reinsurance market has adequate reserves for major disasters.  The House Banking Committee cited the U.S. Re Corporation’s 1995 study as the authoritative source for the total supply of reinsurance.  That study indicated only $7 billion per region in reserves at that time.  Since then, the supply has more than doubled.  Their July 1999 analysis shows that reserves total approximately $14 billion per region for much of the country.

“The Homeowner’s Insurance Availability Act would also negatively impact the private reinsurance industry.  While the private sector would continue to base their rates on the market and risk assessment, the federal government, which would be in direct competition, would be insulated from these factors and more influenced by political considerations.

“By saddling the American taxpayer with large unfunded liabilities, H.R. 21 would compound future disasters.  I urge the House Banking Committee to provide actual protection from catastrophic disasters by allowing private insurers to build their reserves by reducing the prohibitive taxation they now experience.”

CCAGW is the lobbying arm of Citizens Against Government Waste, a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.