Hillary Gets in the Cat Risk Pooling Game

A press release from Senator Clinton’s office, via All American Patriots:

Senators Hillary Rodham Clinton (D-NY) and Bill Nelson (D-FL) today introduced the “Homeowners Defense Act of 2007,” an innovative proposal to pool and diversify catastrophe risk to make disaster insurance for hurricanes, floods, fires and other natural disasters more available and affordable for American homeowners. The Clinton-Nelson bill is companion legislation in the Senate to the bill introduced in the House of Representatives by Congressmen Ron Klein (FL-22) and Tim Mahoney (FL-16).[...]

The Homeowners Defense Act focuses on stabilizing the catastrophe insurance market by expanding the private sector’s capacity to cover a natural disaster and helping states to better manage risk. The Clinton-Nelson bill establishes a Catastrophic Risk Consortium, a non-Federal entity, which states will have the option to join. States will participate by allowing their state-sponsored insurance funds to voluntarily bundle their catastrophic risk with one another in the Consortium. The risk would then be transferred to the private markets through catastrophe bonds issued by the consortium and negotiated reinsurance contracts. The bill also provides for federal loans to states impacted by severe natural disasters to help ensure a state fund’s liquidity in the event of a disaster. This bill will help facilitate and enhance homeowners’ access to insurance, which may ultimately result in lower insurance rates.

I thought I had mentioned the House equivalent bill previously, but sadly my Google-fu is lacking today, and I’m not finding that post. (Or, I could be imagining a post I didn’t actually write. It’s been a fun day today.)

If I had written the post I thought I wrote, I would have noted before that I find the idea intriguing. It’s voluntary, and it’s promoting some spreading of risk among residual pooling mechanisms that already exist, as well as facilitating alternative means to ensure the availability of capital to support capacity. It strikes me as a far better of an idea than attempting to require subsidization of Gulf and Atlantic wind risk by folks in the Great Plains by federal decree.

Also, I can’t help but notice that Hillary seems to be rather vocal in supporting a bill that presumably would attract the interest of voters in Florida…and that the major Democratic candidates for President are boycotting campaigning in Florida due to intraparty squabbling over primary scheduling.

Surely, that’s not coincidence.