Nonadmitted and Reinsurance Reform Act of 2006

NONADMITTED AND REINSURANCE REFORM ACT OF 2006 -- (Extensions of Remarks - September 28, 2006)

SPEECH OF
HON. MAXINE WATERS
OF CALIFORNIA
IN THE HOUSE OF REPRESENTATIVES
WEDNESDAY, SEPTEMBER 27, 2006

* Ms. WATERS. Mr. Speaker, I rise in support of the Non-admitted and Reinsurance Reform Act of 2006, reported by the Committee on Financial Services. I want to thank the Gentlelady from Florida, Ms. BROWN-WAITE, for sponsoring this bill and the distinguished Chairman of the Committee on Financial Services, Mr. OXLEY for reporting this legislation out of the Committee.

* If any of you have visited the Gulf Region in the last year since Hurricanes Katrina and Rita, you know how essential it is that we come to grips with reality and the potential for a major disaster by reforming nonadmitted and reinsurance in this nation. More than half the City of New Orleans' pre-storm population of 450,000 has not returned to the City, while large areas of the City remain uninhabitable. We were not adequately insured to deal with the aftermath of Katrina and Rita--no more than we are today to address another disaster somewhere else in this country.

* We all know that one of the major elements to any recovery after a disaster is insurance, and many of us have heard the horror stories related to the damage incurred as a result of the hurricanes in the Gulf Region. Insurance is one aspect of recovery that we need to be able to rely on after a catastrophe to help make victims whole again. However, on many occasions the reverse has been true, and insurance claims have gone unpaid, or the claims paid have not been commensurate with the damage to the property. In addition, there are many who have not been able to afford insurance and have not been covered, or there are those who had limited and inadequate insurance prior to a natural catastrophe. In many places like California, many homeowners decide not to carry disaster insurance at all, precisely because they believe that the government will become involved if a natural catastrophe occurs.

* In the Gulf Region, many insurance companies did not offer flood damage insurance. Although homeowners have the option to obtain a policy under various state programs, it is unaffordable for most. Most people do not carry any insurance for protection from disasters for this reason. In New Orleans, only one-half of the households had flood insurance under the government's National Flood Insurance program.

* This bill will create more uniformity among the different state insurance programs by streamlining the regulation of nonadmitted and reinsurance activities. This would be accomplished primarily through preempting various state laws. While these state laws would not be replaced with federal law, laws from other states or model laws of the National Association of Insurance Commissioners (NAIC). Further, the bill requires a GAO study of the nonadmitted insurance market. Currently, rather than requiring consumers who may be unable to find insurance from a licensed insurer to go without insurance, states have allowed consumers to purchase insurance from non-licensed insurers. These nonadmitted or surplus line insurers provide insurance for natural disasters. Disaster insurance is regulated and taxed by the state by placing requirements on the brokers who initiate the transactions. Because non-admitted and reinsurance policies are different from state to state, this bill will allow for ``harmonization'' of state laws. It will bring some sanity to the insurance marketplace, particularly where disasters are concerned. Many states have seen a dramatic increase in the cost of non-admitted and reinsurance forcing some businesses to relocate, resulting in unemployment and lost revenue. Therefore, I urge my colleagues to support this bill.

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