Sec. 2. Findings and purpose
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The Congress finds that— the United States has a history of catastrophic natural disasters, including hurricanes, tornadoes, flood, fire, earthquakes, and volcanic eruptions; although catastrophic natural disasters occur infrequently, their costs are likely to escalate in the coming years, in part because of weather-related exposure, coastal development patterns, and increasing property values along the hurricane-prone or earthquake-vulnerable coastlines of the United States; such disasters generate large economic losses and a major component of those losses comes from damage and destruction to homes; for the majority of Americans, their investment in their home represents their single biggest asset and the protection of that investment is paramount to economic and social stability; the United States needs to take and support State actions to be better prepared for and better protected from catastrophes; as the risk of catastrophic losses grows, so do the risks that any premiums collected by private insurers for extending coverage will be insufficient to cover future catastrophes, and private insurers, in an effort to protect their shareholders and policyholders (in the case of mutually owned companies), have thus significantly raised premiums and curtailed insurance coverage in States exposed to major catastrophes; such effects on the insurance industry have been harmful to economic activity in States exposed to major catastrophes and have placed significant burdens on residents of such States;
Hurricanes Katrina, Rita, and Wilma struck the United States in 2005, causing over $200,000,000,000 in total economic losses, and insured losses to homeowners in excess of $50,000,000,000; Hurricane Sandy struck in 2012 along the Northeastern region of the United States, causing over $40,000,000,000 in property damages over a wide area; under the current disaster risk management system, the Federal Government and, hence, taxpayers pay for rebuilding through government grants and low-interest loans, and the Federal Government will likely continue to provide significant levels of financial resources to pay for recovery from future catastrophes; an alternative catastrophe risk-management approach, one that has continued to grow and is now perceived in the marketplace as a viable method of financing mega-catastrophes, would have the Federal Government support State-based efforts aimed at combining disaster risks into diversified portfolios, and developing a common documentation, legal, and operational framework for issuing catastrophe bonds that are transferred to the private sector; and a number of entities in the public sector have already sought protection through catastrophe bonds, and other alternative risk transfer instruments, which package catastrophe risk as securities that are actively bought and sold in the capital markets.
The purpose of this Act is to establish a State-sponsored national catastrophic risk consortium to ensure the availability and affordability of homeowners’ insurance coverage for catastrophic events.