A proposed insurance reform bill seeks to let states decide to participate a national catastrophe insurance pool, spreading the risk of natural disasters while also lowering costs for consumers.

Ron Klein

Rep. Ron Klein (D-Fla.) recently introduced the Homeowners’ Defense Act of 2009, which the Independent Insurance Agents & Brokers of America is calling “a good first step towards a comprehensive solution.”

The bill would make more than 30 states eligible, if they meet certain requirements under the provision, to pool their risk of natural disasters, saving taxpayers money “by taking smart, preventative action before disaster hits, rather than sticking every American with an expensive bill for post-disaster cleanup,” according to a statement by Klein.

“In these difficult economic times, the skyrocketing cost of homeowners’ insurance is pushing more and more families to the brink,” he said. “Now is the time for a common-sense solution that brings real relief to families in South Florida and around the country.”

The bill also features provisions for a catastrophe obligation guarantee program, to guarantee debt issued by eligible state programs to assist in financial recovery; a federal natural catastrophe reinsurance fund, allowing the U.S. Treasury to write reinsurance contracts covering truly catastrophic-level events; and a mitigation grant program, establishing a Treasury program to “develop, enhance, or maintain programs to prevent and mitigate losses from natural catastrophes,” according to the text of the legislation.

In a statement, Charles E. Symington Jr., Big I senior vice president, voiced his support on behalf of the agent and broker organization.

“Natural disasters require a national solution and the introduction of the Klein bill is a good first step towards a comprehensive solution,” Symington Jr. said.  “We applaud the congressman for working to get this introduced in the House.”

The Big I said is supports the goals of each of the four provisions in the bill, but is also encouraging Congress to consider making changes to the reinsurance title of the legislation.

“While the Big I appreciates Congress’ consideration of a national reinsurance backstop for natural disaster insurance, we feel that such a backstop would better encourage private market participation in problematic markets if it allowed private market participation instead of just state catastrophe funds,” Symington said. “We will continue to advocate that Congress consider a solution utilizing the private markets instead of merely state catastrophe funds.”