U.S. policy toward natural catastrophe risk is largely reactive and a comprehensive, forward-looking national natural disaster policy is needed, the NATIONAL ASSOCIATION OF REALTOR® said in testimony to two House panels today.

Charles McMillan, immediate past president of NAR, told Congress that it must improve affordability of property insurance for natural disasters. NAR, as the leading advocate for private property issues, believes that a comprehensive natural disaster policy should include property owners, insurance companies and each of the different levels of government in preparing and paying for future catastrophic events, McMillan said. Citing Hurricane Katrina as an example, McMillan said, Money would not have been paid by taxpayers had proactive federal policies and programs been in place to make property insurance more widely available and affordable.

He also outlined the following criteria for creating a federal policy to:

  • Ensure transparent and comprehensive insurance is available and affordable at premiums reflecting risk;
  • Acknowledge personal responsibility of those living in high-risk areas to purchase adequate insurance;
  • Provide owners incentives to undertake mitigation measures when appropriate;
  • Acknowledge the importance of building codes and smart land-use decisions, stressing the importance of enforcement at the state and local levels;
  • Recognize the role of states as appropriate regulators of property insurance and the role of the federal government cases of mega-catastrophes; and
  • Reinforce the proper roles of all government levels for investing and maintaining critical infrastructure, like levees, dams and bridges.

McMillan said that House bill, H.R. 2555, the Homeowners' Defense Act, authored by Rep. Ron Klein, D-Fla., is a good start toward a comprehensive solution by providing for stable funding sources that would offer the stability needed for more consistency in insurance, availability and affordability.
All reasonable proposals should be considered in creating a national policy to proactively address the inevitable, rather than waiting for the next crisis to occur and rely upon taxpayer-funded bailouts, McMillan said.

He thanked Reps. Maxine Waters, D-Calif., and Paul E. Kanjorski, D-Pa., chairs of the Subcommittee on Housing and Community Opportunity and the Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, respectively, and ranking members Shelley Moore Capito, R-W.Va., and Scott Garrett, R-N.J., for inviting him to testify.

Source: NAR