Homeowners' Defense Act of 2007

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, I rise today to discuss H.R. 3355, the Homeowners' Defense Act. This bill responds to the growing crisis in the availability and affordability of homeowners insurance and further works to protect the financial solvency of States. This bipartisan legislation represents many months of deliberation and thoughtful input from members of both parties and across each region of the United States. We recognize that disasters will continue to occur across the country and are moving proactively to ensure that a plan is in place before the next one strikes.

Every region of the United States is susceptible to some form of natural disaster, be it earthquakes, hurricanes, blizzards, tornadoes, or wildfires, and we are here to provide relief.

It is important to understand that insurance availability and affordability problems have become a national issue. Hundreds of thousands of homeowners across the country have already had their insurance coverage dropped or are currently slated for nonrenewal by their insurance company. Those who remain insured are confronted with crippling premiums, which in some cases is forcing homeowners to make tough decisions about whether to go with or without property insurance, if they have that choice.

Insurance problems are not isolated to Florida, Mississippi, or Louisiana. Last year property insurers indicated that they plan to stop offering new coverage in Maryland and Virginia's

coastal markets, and property insurers have also stopped writing new policies for residents in Delaware, New Jersey, and Connecticut, no matter where in the State the property is located.

Furthermore, tens of thousands of homeowners in Massachusetts, New York, North Carolina, South Carolina, Alabama, and Texas have also been dropped as well. And adding to that, even with California's known record of seismic activity, over 84 percent of California homeowners currently do not have earthquake policies. It is simply unacceptable for property owners not to be able to get reliable coverage in these markets, and it is precisely this reason that legislation is necessary.

The Homeowners' Defense Act aims to take a twofold approach by establishing a program to help States responsibly manage their risk before disaster strikes while also providing financial assistance to ensure that they can quickly and efficiently respond to homeowners insurance claims following a natural disaster.

Specifically, this bill provides a venue for State-sponsored insurance funds to voluntarily bundle their catastrophic risk with one another and then transfer that risk to the private markets through the use of catastrophic bonds and reinsurance contracts. The legislation also allows for the Federal Government to extend loans to cash-strapped States after a large-scale natural disaster so that they can meet their obligations to homeowners.

By utilizing new strategies and an innovative capital market approach, the bill allows investors to assume some of the risk currently held by the States in return for an interest payment. The voluntary nature of the program, coupled with the use of the capital markets, ensures that homeowners in less disaster-prone States will not be on the hook if a disaster strikes a neighboring State.

I want to emphasize that the opt-in nature of this plan creates no burden or obligation whatsoever on States that do not choose to participate. This is essential.

The total economic impact accompanying natural disasters resonates throughout our entire Nation. The total economic damages from the 2005 hurricanes will likely exceed $200 billion, with the Federal Government taking responsibility for paying out in excess of $109 billion for disaster relief.

Although we all agree that it is necessary, this Federal spending is drawn equally from taxpayers across the country, not simply from those in affected regions.

Through this legislation, we are looking to take a proactive approach where States responsibly plan in advance of a disaster, rather than a reactive approach, where the Federal Government and every taxpayer opens up the Treasury after a catastrophe. It is important to emphasize, however, that the status quo is no longer an option. We must work together to establish a system to make sure that property insurance is both available and affordable for hardworking families and those most in need.

I urge Members to vote in favor of this much-needed legislation.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield 6\1/2\ minutes to the gentleman from Florida (Mr. Mahoney).

Mr. Chairman, I yield 1 minute to the gentlewoman from Florida (Ms. Wasserman Schultz).

Mr. Chairman, I yield 2 minutes to the gentlewoman from New York (Mrs. Maloney).

Mr. Chairman, I yield 2 minutes to the gentleman from Florida (Mr. Wexler).

Mr. Chairman, may I inquire as to the time we have remaining.

Mr. Chairman, I yield 4 minutes to the gentleman from Louisiana (Mr. Melancon).

Mr. Chairman, I yield 1 minute to the gentleman from Ohio (Mr. Kucinich).

Mr. Chairman, I yield 2 minutes to the gentleman from Washington (Mr. Inslee).

(Mr. INSLEE asked and was given permission to revise and extend his remarks.)

Mr. Chairman, with the indulgence of the gentlewoman from West Virginia, I yield such time as he may consume to my cosponsor, the gentleman from Florida (Mr. Mahoney).

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, I would also like to acknowledge Chairman Barney Frank, who, without his guidance and leadership and thoughtfulness and process of good ideas, we wouldn't be here today, as well as Tom Glassic, Kathleen Mellody, Lawranne Stewart, Peter Roberson, Patrick Givens from Congressman Mahoney's office, and Garrett Donovan from my office, and all the staff and experts from around the country who have participated in this very carefully thought out piece of innovative legislation.

We are very honored to be here today, because the bill that we have before us is a comprehensive step in the right direction. As a Member of Congress from south Florida, I have lived under the threat of natural disasters for some time. It was only when I came to Washington, however, that I began to discuss this issue with Members from other parts of country who also shared stories about disasters that their constituents faced, earthquakes, hurricanes, wildfires, tornadoes. It was then that I began to realize that this is not a regional problem; it is a national one.

I further reflected on the fact that the Federal response following a major disaster is very predictable. We open up the Treasury and start spending. This spending is entirely necessary, but often is delivered with only few restraints and comes equally from taxpayers in every corner of our country. So even if you are not in a high-risk region, you are still impacted by the event.

Under this bill, participating States would be better protected, again, States that only opt in on their own if they choose; and they would be increasingly able to provide services for those who are not able to find insurance on their own. The State-Federal partnership would present States with the tools necessary to responsibly, fiscally responsibly, manage their risk before disaster strikes, while also ensuring that States can quickly and efficiently respond to homeowners' insurance claims following a natural catastrophe.

This legislation employs several new ideas to help States address the property insurance crisis, such as the transfer of States' insurance risk through the use of catastrophe bonds. By utilizing an innovative capital market approach, the bill allows investors to assume some of the risk, while at the same time putting the burden on local homeowners to do all the necessary mitigation responsibility they have to reduce risk to their own home, to the State, and to the Federal Government.

This is a fundamental rethinking of disaster planning and response, and it is long overdue. Our bill works because it's voluntary, actuarially sound, and stabilizes the market by ensuring that homeowners will always get their claim paid while capping the State liability.

In addition, our bill is fiscally responsible. The Homeowners' Defense Act will end the policy of Federal bailouts following natural disasters.

The steps taken in this bill provide us with a blueprint of how States can responsibly plan for catastrophes ahead while also providing them with a path to recovery.

As I have said time and time again, the status quo is no longer an option. I urge Members of this body to vote ``yes'' on this bill.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I offer an amendment.

Mr. Chairman, the amendment before us is testament to the fact that this legislation is truly a work of bipartisanship. Democrats and Republicans came together as this legislation began to work its way through the process. A number of interested Members reached out to us with well-thought suggestions on how to improve the underlying bill. I am pleased to say we were able to incorporate many suggestions into this amendment, including the adoption of a provision that the gentlewoman from Florida (Ms. Ginny Brown-Waite) has been developing over the last couple of years.

This amendment would establish a high-level natural catastrophe reinsurance fund which would be authorized to write reinsurance contracts to cover catastrophic natural disasters. The addition of such a fund would add a third layer of protection to the legislation, which could further help to increase availability and stabilize rates for homeowners. The fund would provide reinsurance contracts for coverage that is available after the qualified reinsurance program has sustained losses resulting from a 1-in-200-year event.

Coverage would be provided on an actuarially sound basis and would not displace or compete with the private market. This provision will go a long way with providing high-level protection for States coping with natural disasters.

The amendment also provides for a study and conditional authorization for the inclusion of commercial residential lines of coverage. It is important for us to make sure that renters are not left behind following a disaster, and this

provision takes us in the right step of determining how capacity restrictions impact housing affordability for renters. I know this was a concern brought up, and I am glad to include it in this amendment.

I am also pleased that we were able to include a provision suggested by the gentleman from Florida (Mr. Putnam) which ensures that qualified reinsurance programs will engage in responsible reserving. This provision would use an NAIC-developed formula to ensure that participating States will be operating in a sound fashion.

We also wanted to make sure that States would not become overly reliant on programs established under the legislation, and this addition will add a safeguard against that concern.

Again, I would like to thank those Members who have come forward with suggestions on how to improve the bill. I urge a ``yes'' vote on the amendment.

I yield back the balance of my time.

I thank the gentleman from Illinois, and I do appreciate the fact in our committee, the Committee on Financial Services, you had a number of interesting inquiries, some of which were incorporated and some are still a work in progress.

I will be more than happy to sit down, as this bill goes through the process. Obviously the Senate is going to begin to consider this bill. There will be opportunity through the conference, and I think there should be an opportunity to take a closer look at this issue.

I thank the gentleman from Illinois. And just to respond to a couple of points there, the building up of reserves and the passing of savings to consumers are not necessarily inconsistent points. One of the goals of this bill is not to make more money for insurance companies, many of them are doing just fine, it is to try to create stability in the market at an actuarially sound rate. I take your points, and they are well taken in terms of making sure we learn from mistakes. I commit to the fact that we will continue to work through this and make sure that it is based on sound actuarial principles by which definition usually sound actuarial estimations do take into account future anticipated events. I commit to that point.

I thank the gentleman from Illinois. The notion of the terms of repayment are to be negotiated with the Treasury. Each State may have a slightly different scenario in terms of terms and conditions.

What I would expect to be negotiated would be, just like any other private sector contract with a set of covenants and defaults in terms of understanding what the expectations are. So I would expect the Treasury, and if we need to get that clarified in the future, I would be happy to, but I expect the terms to be very clear regarding notification and things like that.

I thank the gentleman from Illinois.

I think the thinking is this is an authorization. It is not an appropriation.

The general notion is in the early stage of this thing, it is a relatively small amount of dollars. It creates authorization if necessary.

If you have a number of States that do participate, which we anticipate, I think the language of the bill talks about the fact that they will pay for that. The notion is there is an authorization. And to get more States involved to pay for it, there is this limited amount of Federal responsibility. I think the thinking is that the States will take responsibility.

I am a true believer, if you give somebody 5 years to do it, it will take 5 years. At the same time I realize from the experience we have had in Florida and many other States that have tried to move forward with building codes and other things, it does take some time. But I am all for encouraging as strong as possible to move as quickly as possible.

Mr. Chairman, I move to strike the last word.

Mr. Chairman, with all due respect to my friend, and all of us are freshmen here, Mr. Mahoney and Mr. Roskam, we're all new to this process, but with all due respect to his approach here, the problem with the amendment is that this takes the Federal Government and puts its stamp of approval on local building codes.

And from my perspective, I don't think we want the U.S. Treasury or FEMA or anybody else to be responsible for making decisions on local building codes. These are very localized functions, certainly will encourage mitigation, and we've got some standards in place and our colleague from Connecticut (Mr. Murphy) in a few minutes I understand is going to be offering a very good amendment which deals with some Federal standards that are outside the Federal Government's role, but some trade industry standards on building code which relate to mitigation and reducing the hazard and reducing the potential exposure.

So while I do appreciate the fact that Illinois may have different issues than Iowa, that has different issues than California, there's different issues in Florida, we certainly, in my view, don't want to federalize, if you will, the building code process. And it's something that I believe that we should allow local governments, within the confines of standards that are adopted by the industry, to reduce exposure to natural disasters. I think that's a better way to do it.

So I would suggest that this amendment be opposed and that the Members of the House vote against it.

Mr. Chairman, I yield back my time.

I would like to thank the gentleman from Connecticut for coming up to a response to what I think the gentleman from Illinois was raising; that is, we want to encourage mitigation. We want to encourage reduction of the scope of the hazard.

I think all of us understand that the more you can do to protect your home in terms of the roof, if it's an earthquake zone, the foundation, lots of different kinds of risks out there, but the more we can do to solidify that, the less deductible you are going to pay as a homeowner, which is good for you as a homeowner, the less risk you are creating for the insurance underwriter, the less payout, the less the State is going to have to take responsibility if there is a State risk catastrophe fund. With a Federal system to back it up, beyond that, in terms of the State catastrophe bonds, it reduces that as well.

The whole purpose of this is to reduce that. What the gentleman from Connecticut has come up with in a broad-based way is to bring in the international code, council building codes, which is an organized effort, well thought out, well designed. Instead of having the secretary of the Treasury, which I am not quite sure who or what qualifications he or she would have to make an independent judgment of whether a building code makes sense or not, let's put professionals, the experts, the people who understand building codes, let's put them in the middle of this thing and say this is the standard by which we will judge whether a State is doing what it is supposed to do to reduce that risk.

I think that's a very sound, logical way of solving the problem, encouraging the mitigation, reducing the hazard. I think it's something that deserves to be supported.

I would like to thank the gentleman from Connecticut. Hopefully the gentlewoman from West Virginia and the gentleman from Illinois will join us in what I think is something that addresses their concern, and probably we can all come together and say this is a solid way of doing it.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, let's get down to the bottom of what we are trying to accomplish here. There is a problem in the United States, in certain parts of the United States, where the insurance market, unfortunately, cannot deal with a very large disaster.

Now, some of our colleagues may not have been exposed to this problem because in their markets they haven't had any large-scale natural disasters, but the more time that passes, the more communities are affected by large-scale natural disasters.

The impact of a very large-scale natural disaster is that the insurance industry in these areas retrenches, pulls back, cancels policies or they call them nonrenewal.

I have to tell you, one of the most frustrating things after living through some hurricanes in Florida was members of my communities calling me up, as a State Senator, saying, I paid my premium for 15 years straight, and now I am afraid to make a claim because I have had some damage, never made a claim before, but I am afraid to make a claim because the insurance company is going to cancel me.

Something is wrong with the market, free market, as we like to think of it, if that is happening. People want to know the bargain is if I have paid my premium my insurance company is going be there and there is some stability behind it.

What we have tried to do is recognize that in some cases, not many, but in some cases, and the very high scale of large-scale natural disasters, there is some reaction that has to be provided. What we have done, instead of putting the government in the middle of it, which is exactly where it is right night now, no matter how you slice it, every time there is a large-scale natural disaster that the insurance company can't

deal with, the States can't deal with, then the Federal Government comes rushing in, from Washington, with a big check.

What we have been trying to do is something proactive, up front. We have come up with some plans from experts in the insurance industry and the consumer side and everything else to balance this out.

What this amendment does is it arbitrarily limits the ability of programs to meet the reinsurance needs of the respective States not provided for by the private sector. The limit shows, and it is a 100- year event. Why 100? Why 1 in 100? Why not 1 in 50? Why not 1 in 250? As you can imagine, a 1-in-250-year event really changes the dynamics of the equation of what will have to be paid in reserves and make sure that the money is there.

They have chosen 100 years. That is consistent with the way we have very carefully, with a lot of input, chosen to work on this formula. We have chosen events where the losses have exceeded 150 percent of the aggregate amount of direct premium over the prior year.

That is a direct reflection of what's going on in that local market, how much premium's been paid. It's a 1.5 factor over and above that. It's very well thought out. It may not be perfect. It may be over time there's a better way to do it, but this is a very consistent approach we've taken throughout the bill.

If you adopt this amendment, we are now creating two inconsistent measures which I don't think will ever work together. So I would suggest that this amendment not be adopted.

I believe that we have come up with something that is logical, it's common sense, it reacts to the fact that there is a need here.

And again, for those folks who live in parts of the country that don't have natural disasters up to this point, let's all continue to pray and hope that we don't have many natural disasters.

But we're a country that's in this together. Certainly our insurance is something that we want to make sure everyone has the ability to have private homeowners insurance. But more importantly, every taxpayer is part of a bail out. We're trying to avoid that for the future.

So I would suggest the amendment should not be supported.

I yield back my time, Mr. Chairman.

Mr. Chairman, I appreciate the gentleman from Illinois' proposition that if you are in default, you probably shouldn't be able to get anything further because maybe you haven't acted responsibly. But there are two faults that make this amendment unnecessary.

Number one, if a State is a recipient of a loan and it has defaulted or hasn't made the terms of payback, that has nothing to do with a State risk catastrophe fund, which is independent of the State. Most State risk catastrophe funds are not backed by the full faith and credit of the State. They're separate, independent organizations. So one has really nothing to do with the other. The fact that the State of Illinois may not have paid back something that it had received from the Federal Government should have nothing to do with an Illinois risk catastrophe fund if it has been doing whatever it's supposed to do. So I think that's number one.

Number two, the notion of the one disaster and then the Illinois risk catastrophe fund defaulting or not paying back, we have already taken care of that problem in terms of a future disaster that hits Chicago. And that is the Treasury who would be responsible for authorizing the second loan would not grant that. It is already provided in the content of our bill.

So I do support the proposition that if you are in default, you probably shouldn't be a continued further drag. And I think that we have taken care of that in the bill, and I think it's not necessary to pass this amendment.

I yield to the gentleman from Illinois.

Reclaiming my time, Mr. Chairman, I don't agree with the amendment because what it does is it creates an unnecessary regulatory burden. You already have in place the Treasury. Our Treasury Department in Washington would look at it. There's a default. Under the current language of the bill. Take a look at the language of the bill. It specifically says they would not be entitled to another loan, so we've already taken care of that problem.

As it relates to the State itself being in default, the State is independent of a State risk catastrophe fund. So the fact that the State of Illinois doesn't repay something to the Federal Government doesn't necessarily or should not necessarily put a burden on an independent organization that has a State risk catastrophe fund that does not operate under the full faith and credit of the State of Illinois.

So, again, I support the notion that a deadbeat should not receive more. But, again, we are dealing with States and organizations where we've already taken care of the problem or that we are looking to solve a problem that really isn't there.

So I would suggest that this amendment should be opposed. It's unnecessary and duplicative, and I think we've already addressed the problem very clearly in the legislation.

I yield to the gentleman from Florida.

Mr. Chairman, will the gentlewoman yield?

I'm looking back at the amendment. And the point I was trying to make, which I think is pretty clear here, is that it says ``under any loan previously made under this Act or any loan provided by any agency or establishment of the Federal Government to the program,'' that's the risk catastrophe fund, ``or the State for assistance in connection with a natural or other major disaster.''

First of all, a question for you is the money that goes to a State, are you talking about FEMA money?

You're saying ``the State for assistance in connection with a natural or other major disaster.'' To the State. You're saying if there's a default in money that went to the State.

Then what are you referring to? What is the default you're speaking of, then?

There is no money that under this program goes to the State. It goes to the participants of the risk catastrophe funds. Those are independent.

The way this is designed is that the loans are structured between the risk catastrophe fund and the Treasury under terms and conditions that are acceptable to the

Treasury. Now, if there is a default under those terms and conditions, it's already clear in our bill that the Treasury will not lend under any future natural disaster, if that's what you are concerned about, and I think it says here. It's already part of the bill, and I think that answers the question.

The good news is that we are in agreement that we certainly want to make sure this is fiscally sound and responsible. I think we all agree on that.

The only thing I'm suggesting, as we pull up this language, is that it's already in the bill. The intention is that the Treasury have this authority. If it isn't clear, we would be glad to fix it. But I think it is crystal clear and we'll just pull it up.

I thank the gentlewoman for yielding.

The Full Taxpayer Repayment section of the bill, page 20, line 6: ``The Secretary shall require the full repayment of all loans made under this title. If the Secretary determines at any time that such full repayment will not be made, or is likely not to be made, the Secretary shall promptly submit a report to the Congress explaining why such full repayment will not be made or is likely not to be made.''

I thank the gentlewoman for yielding.

I want to commend our colleagues on the other side of the aisle from Florida as good advocates for their districts in recognizing that Florida has a serious problem. I think that if everybody had that same confidence that Federal taxpayers weren't going to be involved and that this ultimately was an insurance program that was going to be completely clearly funded, the money was going to come in, it was actuarially sound, and it was going to go out, a lot of us would say ``no harm, no foul, great.''

But a lot of us have a real sense of concern because what we have done is we have looked at Florida, and my conclusion is that part of the problem of Florida and the difficulty that they are facing is because of governmental intervention in the insurance marketplace. It seems to me that the State of Florida came in and began to manipulate the marketplace insofar as other companies then ultimately made decisions, ``look, this is too high maintenance, this is too complicated, we are not able to price this appropriately, we are out of here.''

We heard testimony during the Financial Services Committee from folks who said the depth and breadth of building in Florida, in many cases, is simply inappropriate, building in very risky areas. Now, the bill speaks to some to mitigation, but I think we can do much better. And over the course of this afternoon, in a series of amendments that we intend to offer, some of them on the manager's amendment and some of them specific roll calls that we will be seeking, we are going to try and drive the conversation toward market solutions to this problem.

We are told time and again, I have heard both speakers this afternoon on the other side talk about an opt-in, talk as if this is a voluntary program. Well, I will tell you what; it is not a voluntary program for the Federal taxpayers that I represent. Federal taxpayers that I represent, I believe, are ultimately going to be on the hook for the liabilities and the commitments that are made either explicitly or implicitly through the language of this bill.

I urge a great sense of caution not to get caught up in the emotion of this, but to be clear-eyed and clear-thinking in how we debate this, and ultimately to oppose this bill in its current form.

Mr. Chairman, I rise in opposition to the amendment and to engage in a colloquy.

Mr. Chairman, I had previously presented or put at the desk 11 amendments to the manager's amendment that I am not going to be offering this afternoon. Instead, and in the interest of time, since I wasn't seeking roll calls on them, anyway, I just raise a series of questions that I am putting forward in good faith. They have been brought to my attention by our staff. Some you may have answers for; some you may have contemplated. Others you may say, let's think through that a little further, because my sense is, while the House is about to act, this is still very much a work in progress on Capitol Hill when it goes to the other Chamber.

The first question I had is the term ``capital liquidity shortage.'' It is a term that is used exclusively in the text of the bill itself, but it is not defined anywhere else. It is not a legal term of art that I am aware of. We have done some Google searches on the Internet, and it is a phrase that is unique to this bill. It is not defined.

My concern is that it could create, really, the maximum liability that could be incurred at any time. I am wondering if the gentleman from Florida is open to further defining ``capital liquidity shortage''?

And I will be happy to yield.

I yield to the chairman.

I thank the gentleman.

Another term is the term ``commercially reasonable rate.'' It is also not defined anywhere, and I would just submit that is another area that we ought to be looking at.

The other notion is that State programs should be required to charge actuarially sound rates and build up reserves based on a 1-in-200 year standard used elsewhere in the manager's amendment. My concern is we run into a situation like we have with the flood insurance program. We should learn from that mistake.

The weakness of the flood insurance program was that it contemplated simply anticipating the actual output, as it were, the actual claims, rather than thinking from an actuarial point of view where you contemplate the unanticipated. The way we have to do this, the way this process has to be set up, is it has to literally anticipate the unanticipated. And the way the manager's amendment is currently crafted, it doesn't do that. In other words, it doesn't allow the building up of reserves over a period of time so that the fund itself is actuarially sound and that it can sustain an unexpected loss, the massive storm, the unbelievable event that is literally not contemplated.

There are two things that are inconsistent within the bill, it seems to me. There is this lower view of contemplation of what you can build up. But it also says you have to pass on the savings to the consumer. So, literally, the fund is not able to build up the reserves that are necessary in anticipation of what can't be anticipated.

With that, I yield to the gentleman.

Reclaiming my time, I thank you. I just submit that the language, as I understand it in the manager's amendment, doesn't achieve the goal that you and I are seeking.

Finally, I would also like to draw attention to the notion of, sort of what I am characterizing in my fear as that repayment is a myth fear.

Under the manager's amendment, if a State program is somehow going to incur losses that exceeds its maximum liabilities, shouldn't it have to show how it is going to prevent that in the future? And there is no point in the manager's amendment where there is that reporting requirement. Again, I don't think that is onerous. I don't think it is difficult, but I think it would be a good idea to require a State before they make a claim or before they default to come forward and say, look, this is how we are going to avoid this in the future. I think it is a de minimis reporting requirement.

I yield to the gentleman from Florida.

I thank the gentleman.

Another observation is that States should pay the cost of the consortium. Now, as drafted, the cost of the consortium is by Federal taxpayers. There is no payment mechanism in the manager's amendment for the consortium to be funded by the States. I think that is an oversight and it should be revisited.

The manager's amendment sets up $120 million over 6 years, I think, but I think there should be a way for the States to pony up. At least theoretically you can contemplate where the Federal Government would create this consortium, and maybe nobody's in. At that point it would be a foolish enterprise. I think there has to be a way.

I yield to the gentleman.

Finally, on the basis of time, and I will be happy to continue the conversation with you and the chairman, in my view, I think the grace period for States is too long for their mitigation efforts. For those States currently with a program in place, the manager's amendment says all of these mitigation components are excellent, but we are going to give you 5 years to get your act together.

My suggestion would be let's shorten that up. Let's make it 2 years, and I think that is still very gracious, to follow on the word of grace. But 5 years is almost the length of the entire program that is being proposed. That is a suggestion regarding a way that I think the bill can be improve.

I yield to the gentleman.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I offer an amendment.

Thank you, Mr. Chairman.

Today I offer an amendment essential to stopping this Congress from running down a road that I've expressed caution about earlier today, and that is causing further government involvement in self-sufficient, available, and reliable private markets.

Congress recently passed the National Flood Insurance Reform; and while I didn't agree with the wind provision inclusion, it made crucial strides in reducing damage from flooding and storms, especially in areas suffering repeat events. However, H.R. 3355 does not specifically prescribe mitigation guidelines. In title II, it merely alludes to Treasury providing a general directive; and, in my view, that's not good enough.

Currently, H.R. 3355 only requires the reinsurance fund receiving the loan to provide coverage for properties that adhere to applicable State building codes, leaving open the possibility that States with substandard codes, or even lacking codes, can still access the loans.

Instead, Treasury should be required to certify that the State has implemented best practices building codes for the applicable exposures, taking into account the State's geography, catastrophe risk and building patterns, which is what my amendment does here today.

This would not be a national building code, but rather, a regionally specific criteria for program participation.

The language in my amendment also gives broad flexibility to the Treasury to certify whether State building codes are appropriate for the types of risks they face. It doesn't apply specific, bureaucratic and unreachable one-size-fits-all standards for the Treasury to abide by.

The language is necessary because the current language in the bill would create an implicit guarantee that would result in an inequitable Federal subsidy for certain State insurance programs and policyholders, thus creating no need for local municipalities and developers to stop development in risk-prone areas. This was made very clear during the testimony that we heard in the hearings several weeks ago.

The further subsidization of rates would undermine economic incentives to mitigate risks. Individuals facing subsidized rates would be encouraged to take on risks that are inappropriate, specifically putting themselves in harm's way because they don't bear the full weight of the potential damages.

Now, I represent citizens from Illinois, and we would never choose to participate in this program. And let me tell you, the view from Lombard, Illinois, is very different from Key West, and God bless the folks that live in Key West, but I don't think that the residents I represent should be in a position to subsidize someone else's view.

Why should Illinois bail out States that can't address their own problems? While I'm sensitive and I admire my colleagues from Florida, I do believe that some of this is simply an exacerbation of government programs that have completely failed. Many other States have taken into account and addressed market issues based on increasing private market participation.

South Carolina introduced policyholder or catastrophe savings accounts to assist consumers and address cost issues. Louisiana and South Carolina addressed rating and regulatory matters by encouraging greater competition among insurers rather than rate controls that discourage private market competition. Louisiana has committed financial incentives for insurers to underwrite or take policies from the residual market and write-in coastal areas. Several States have also improved building codes and their enforcement as part of the long- term solution to catastrophic risk.

Floods are the majority of disasters that my congressional district faces, and we haven't sat by and waited for the government to help. The State of Illinois has one of the strongest floodplain management programs in the country. Illinois leads all Midwest States for the number of NFIP-participating communities, flood insurance policies, and flood insurance claims. Illinois outpaces the other States in local floodplain assistance, mitigation activities, and flood control projects.

Specifically, two cities in my district, Des Plaines and Mt. Prospect, were badly hurt by floods in August of this year. But they didn't suffer as much as they could have, because they are moving forward on major flood mitigation efforts by building levees on the Des Plaines River. This project will move hundreds of homes and businesses out of the floodplain, thus reducing the amount of damage during flood season and lowering insurance rates for homeowners.

There's been an unprecedented population growth and significant development in coastal and disaster-prone areas in recent decades, and total property exposures have increased dramatically.

We certainly cannot anticipate what storms will be like in the future, but we can and should take steps to reduce and lessen these risks.

I urge my colleagues to support this important amendment.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I demand a recorded vote.

Mr. Chairman, this is what I characterize as the skin-in- the-game amendment.

The bill currently has no retained loss requirement for participating State reinsurance funds before they can get a catastrophic loan from the Treasury. Once the trigger is met, a fund may qualify for a loan without having any skin in the game.

To improve fiscal accountability, States should be required to first sustain a loss before receiving a loan from Treasury, similar to paying deductible in an insurance policy. The loans could be better put to use helping States manage their losses above the retained loss requirement.

This amendment says that before a State insurance fund can access one of the loans created in the bill, it must first retain sufficient losses amounting to a 1-in-100-year event with respect to State catastrophe perils. This amendment will encourage State funds to handle a predictable level of loss before putting Federal taxpayers on the hook for billions of dollars in catastrophic loans.

With no retained loss requirements, State insurance funds will have no incentives to price their risk with a catastrophe factor but, instead, rely on post-event debt financing from the Federal Government and Federal taxpayers. Adding the retained loss requirement in this bill will also encourage States to utilize the global reinsurance market instead of turning directly to the Federal Government to capitalize their funds.

Currently, Florida is the only State with a reinsurance fund that would qualify under this bill. The bill would undoubtedly spur the creation of other State funds, and requiring States to have skin in the game will encourage these new funds to properly capitalize instead of taking out a huge loan from the Feds after every natural catastrophe.

Without loss requirements, State insurance funds will have no incentives to actuarially price their risk since they will be getting cheap loans to assist them in paying their claims.

I urge the adoption of the amendment and yield to the gentleman from Louisiana.

The gentleman has an incredible gift of clarity and insight, and that is exactly it.

Reclaiming my time, I think part of the reason we are in this state today and one of the reasons we are having this conversation is because of, really, a lack of some of those commonsense approaches towards their problem in the past, which is now why Representative Klein and Representative Mahoney feel in good faith that they have got to come here on behalf of their constituents, and I understand that.

I would submit that this amendment brings some clarity, brings a little bit of pause, brings some reality to this so that over a period of time a future Congress doesn't have to come in and request an abundance from the Federal Treasury due to mismanagement and squander.

Mr. Speaker, today is a turning point for how the Federal Government responds to natural catastrophes. Today, the House of Representatives has the ability to ensure that homeowners across the country will have access to affordable property insurance. More importantly, we have the opportunity to protect and preserve the American Dream of home ownership with the passage of H.R. 3355, the Homeowners' Defense Act of 2007.

Before I begin summarizing the national catastrophe insurance crisis affecting the 16th Congressional District of Florida, I want to reiterate that this is a national problem. Let me be clear: Congress has been forced to act because private markets for homeowners insurance have failed. The issue is not the industry's ability to pay claims or write policies. It is the American's ability to purchase affordable homeowners insurance.

This legislation we are considering today, the Homeowners' Defense Act of 2007, is essential, as an individual's home is the single biggest investment an average American has, and it is vital that we protect it.

North America has the greatest occurrence of natural disasters of any continent. And thanks to global warming, science is forecasting that we are going to see the incidence and severity of disasters increase.

I am proud that the legislation we are considering today preserves the private homeowners insurance industry. H.R. 3355 recognizes that no one got into the insurance business to underwrite a catastrophic event, whether it be an act of war or an act of Mother Nature. The bill gives the insurance industry the ability to operate without fear of insolvency due to a mega-catastrophe we all know will happen. However, because no one can predict when the next earthquake, hurricane or tornado will strike, the industry is forced to plan and incur the expense necessary to cover a 1-in-200 year event every year.

The program established by this legislation is voluntary. Each State will have the opportunity to assess its risk of natural catastrophes. After analyzing its exposure to natural catastrophes, a State can choose to participate or not.

H.R. 3355 is fiscally responsible. The legislation sets a historic precedent. No longer will the American taxpayer have to foot the cost of a natural disaster with an expensive government bailout. As I said earlier, we know that these catastrophic events will happen. The Homeowners' Defense Act ensures that we plan for them in a fiscally responsible manner and does not cost the American taxpayer a dime, while ensuring that homeowners take personal responsibility for their choice to live in areas prone to more frequent natural catastrophes.

In 2004 and 2005, natural disasters resulted in approximately $89 billion in privately insured catastrophic losses. Science tells us that these disasters, their severity and frequency, are going to increase and have caused the insurance industry to adjust their models for insuring these events. As a result, insurers are pulling out or reducing their exposure in disaster-prone areas of the country. In some cases, new companies encouraged to enter the market do not have the financial strength to pay claims following a natural disaster because they are undercapitalized. Likewise, larger insurance companies have created smaller State subsidiaries for the purpose of limiting their liability. This problem has concentrated risk in States, further complicating the problem.

In some situations, like in my home State of Florida, the market has deteriorated so drastically homeowners can't get insurance, regardless of price. In an effort to address this growing problem, Florida has had to step up to avert an economic disaster by creating a State-owned insurance company. Today, unfortunately, the citizens of my State are the owners of the biggest homeowners insurance company in Florida with over 30 percent of the market.

Lost insurance capacity is not the only issue confronting homeowners today. Families have seen their insurance premiums skyrocket. The toxic cocktail of rising gas prices, health care costs, and homeowners insurance have created a vicious cycle of terror for our seniors living on fixed incomes and our middle-class families struggling to provide for their children.

Just yesterday, I spoke with a single mother in Stuart, Florida, who is making a good income of approximately $60,000 per year. She told me that, without warning, her monthly payment went up almost $500 per month. She is struggling to save money to put her daughter through college, and she's fearful she won't be able to pay her bills.

The Financial Services Committee has held numerous hearings this year on this issue. During these hearings, several facts became clear. The risk posed by natural catastrophes is not going away. The damage caused by disasters will keep growing, and insurance premiums are likely to remain high.

As Congressman Klein noted, the Homeowners' Defense Act is a two- pronged approach designed to address the property insurance crisis, which I have outlined, and ensures a stable insurance market that will give States impacted by severe natural catastrophes the ability to help their citizens rebuild their homes and their lives.

Title II of the bill, ``The National Homeowners Insurance Stabilization Program,'' extends Federal loans to States impacted by severe natural disasters. These loans, which will be paid back by the States, will allow a State's catastrophe program the ability to cover its liability in the event it is not fully funded at the time of the disaster.

Because the legislation utilizes private capital markets and a loan program that requires repayment in affected States, it eliminates cross-subsidization. Taxpayers will not be asked to subsidize homeowners that choose to live in high-risk communities.

In a letter dated November 6, the National Association of Insurance Commissioners stated that H.R. 3355 provides a viable solution for the State and Federal governments to work together to address this dilemma and address the natural catastrophe threat.

In closing, I would like to thank Chairman Frank, Congressman Kanjorski and Congresswoman Maxine Waters, as well as their staff, for their continued commitment to America's homeowners. Their support and leadership has been essential to making this legislation a reality. I would also like to thank my colleagues from Florida, Representatives Ginny Brown-Waite and Adam Putnam. Their input on this legislation has been invaluable and serves as an example of what Congress can achieve when we work together in a bipartisan manner.

I would ask my colleagues to stand up for the American homeowner and taxpayer by voting ``yes'' on H.R. 3355.

Mr. Chairman, I want to thank everybody for having this open debate today and discussing something that is very important to people across this country. This is all about the dream of homeownership. This is about markets working. This is about stabilizing the insurance market so that people who go to work every day can fulfill their dream of homeownership.

What we have today is a situation that is understandable. We have a situation where as a result of an increase in the severity and the frequency of natural disasters, insurance companies are prudently increasing premiums. What they are seeing is, as a result of this, an unfunded liability in the billions that they have no other recourse but to either leave markets or raise rates so high that working families can't afford their homeowners insurance.

Today, we have the ability to help those people; and we have a very special opportunity, because we can do something here in Washington, DC that we can all be proud of when we go back home, and that is we can fix a problem and do it responsibly. We can end the bailout. We can end the cycle of writing checks and expecting nobody to pay them back, which is exactly what has happened over the years with Katrina and Wilma and other major storms across the Nation.

I hope that everybody takes a very close look at this. Many people have described this as a payoff or a bailout for Florida. This is not. This is responsible legislation. It not only expands

the market for private insurance; it makes sure that States have the ability to get money to people after a disaster so they can get in their homes and so they can keep their communities alive. Finally, it is responsible because it encourages mitigation and it encourages building codes. It supports the idea of responsible development.

In conclusion, I want to thank my dear friend Congressman Klein and the journey over the last year to the week when we both got elected to Congress and came here with the hope of trying to solve this problem and being here today.

I want to thank my staff. I want to thank Patrick Givens for all the work that he has done. I want to thank Garrett Donovan, who has done an amazing job, and the complete staff of the Financial Services Committee.

In closing, I want to thank Barney Frank and the leadership for understanding that this is about people. This is not about companies.

National Association

of Insurance Commissioners,

Kansas City, MO, November 6, 2007.

Re H.R. 3355, the Homeowner's Defense Act.

Hon. Ron Klein,

Cannon House Building,

Washington, DC.

Hon. Timothy Mahoney,

Longworth House Building,

Washington, DC.

Dear Congressmen Klein and Mahoney: The NAIC congratulates

you for putting forth legislation intended to help States

better manage the threat of natural catastrophes. We

appreciate your willingness to consider our perspective

during the bill's development. States have developed a

variety of tools to fill insurance gaps in areas where the

private market is either unwilling to provide property

coverage, or where consumers are unable to afford it. Your

legislation provides another tool for States to consider,

without handing down a federal mandate to participate.

H.R. 3355 provides a strong correlation to guiding

principles the NAIC adopted when evaluating federal

catastrophe proposals. For example, the bill is voluntary; it

does not impede State functions; it encourages availability;

it recognizes the States' important role in insurance

regulation; it forms a State-federal partnership approach to

address availability; it follows actuarial principles; and it

allows States to pool risk and utilizes the capital markets.

The insurance and reinsurance markets have a significant

amount of capacity, and access to that capacity for events

that are small yet frequent is generally affordable. But for

those that live in areas where events can be infrequent yet

catastrophic, access to insurance capacity after a

significant event is either unavailable or unaffordable. This

is the dilemma that regulators and legislators must face

together.

H.R. 3355 provides a viable solution for the State and

federal government to work together to address this dilemma

and address the natural catastrophe threat. We encourage our

members to strongly consider this program for their needs.

We thank you for your leadership on this critical, national

issue, and we look forward to continuing to work with you to

enhance the bill through passage.

Sincerely,

Walter Bell,

Alabama Insurance Commissioner, NAIC President.

Catherine J . Weatherford,

NAIC Executive Vice President and CEO.

Mr. Chairman, I move to strike the last word.

I'd like to join in support of my friend here from Florida (Mr. Klein) in opposing this amendment.

The point I'd like to make is very simple, and that is, the whole purpose of the bill is to stabilize the private homeowners insurance marketplace. And the goal of the bill is to work with the industry to continually find ways to expand the market so that the market takes the responsibility.

Right now, the problem that we're facing in the homeowners insurance market is unfunded liability, where we have the opportunity or the specter of a disaster, where the combination of States and the insurance industry do not have the financial wherewithal to pay claims.

The purpose of this bill in the first title is to try to work with States to consolidate risk in order to expand the private market's activity so that it can handle these claims.

So when the gentleman from Illinois proposes to arbitrarily set a 1- in-100-year mark, what it's doing is it's running counter to the goal of the legislation, which is to get the private insurance companies to take on more and more of the responsibility.

So with that, I think that the bill that we have right now recognizes that there needs to be some variability in some cases. One in 100 years, depending on States, might be too little; and in some cases it might be too much.

So, therefore, I would urge that this amendment be defeated.

I yield back the balance of my time.

Mr. Chairman, will the gentleman yield?

I would just like to also point out, too, that after an event of a natural catastrophe, I don't think it's in anybody's best interest in terms of getting people back in their homes and preserving communities to get into an administrative argument as to whether or not a particular loan has been paid or repaid based on what's going on between the State and a particular community that's in need of funding.

So although I appreciate the gentleman's point, I think that the danger here is that there could be a lot of ways that people could look at this issue and determine that there is a conflict between the way a State looks at a particular loan.

And it's not just catastrophe loans, as the gentleman's amendment talks about. It's any loan where there might be a conflict between the State and the Federal Government. And all I can tell you is that I don't think you would want to put your citizens in a bureaucratic mess when they are out of their homes and they need to get back in and that we need to save their communities.

Mr. Speaker, by direction of the Committee on Rules, I call up House Resolution 802 and ask for its immediate consideration.

Mr. Speaker, for the purpose of debate only, I yield the customary 30 minutes to the gentleman from Texas (Mr. Sessions). All time

yielded during consideration of the rule is for debate only.

I yield myself such time as I may consume.

General Leave

Mr. Speaker, I ask unanimous consent that all Members be given 5 legislative days in which to revise and extend their remarks on H. Res. 802.

Mr. Speaker, H. Res. 802 provides for consideration of H.R. 3355, the Homeowners' Defense Act of 2007, under an open rule with a preprinting requirement. This rule allows for floor consideration of any amendment that is in compliance with the House rules and the Congressional Budget Act and has been preprinted in the Congressional Record.

Mr. Speaker, in the face of natural catastrophes that too often strike our communities, the Congress today will initiate a new planning effort through H.R. 3355 and this rule. This new effort will assist our communities and hopefully tackle the rising cost of homeowners property insurance.

My colleagues from Florida, Representative Ron Klein and Representative Tim Mahoney, have led this bipartisan effort. I thank them for their tireless work and leadership, their leadership that should help our neighbors back home and folks across this country find affordable and available homeowners insurance.

Following some of the most expensive natural disasters in our Nation's history, like Hurricanes Katrina and Rita and Wilma and the fires and the floods and the earthquakes, homeowners across this country have been subjected to wild fluctuations and horrendous cost increases for their property insurance. Insurance premiums are out of sight. They have skyrocketed. Well, we understand. We feel it in our own bills.

I hear it from the retired older woman in West Tampa back home who has owned her house for 30 years and is on a fixed income. But this exponential increase in insurance that she has suffered may force her to sell her long-time home.

I also hear it from the hardworking folks in south St. Petersburg who have been cancelled by their insurance companies after decades of paying their premiums without making any claim upon that insurer.

Due to all of the policy cancellations, we now have a crisis. Insurers have fled the State. In some areas, insurance premiums have gone beyond what any reasonable person would consider anything that they can handle in their everyday lives. A rate increase of over 600 percent is not unheard of. Some of our neighbors are having to rethink their retirements because they can no longer afford to live in their homes. But if they tried to sell, nobody can afford to buy those homes.

And, unbelievably, the State of Florida is now the largest provider of homeowners property insurance in our State. This problem is not limited to the State of Florida, however. Across the country over the past 5 years, homeowners insurance premiums have increased by over 45 percent on average. In Florida, that average increase is over 77 percent. And there seems to be no end in sight unless we work to create innovative options, like this bill, that will bring stability back to the marketplace and sanity back to insurance premiums.

Over 3 million loyal policyholders, many of whom have never submitted a single claim, have received letters from their insurance companies, nondescript envelopes that carry the message, ``Your policy is not eligible to be renewed.''

Last month a story caught my eye entitled, ``Home Insurers Canceling in the East.'' It said that insurance companies have essentially begun to redraw the outline of the eastern United States somewhere west of the Appalachian Trail.

Faced with the risk of their citizens being priced out or thrown out of private insurance markets, States have begun to take action. The State insurance program in Massachusetts has doubled as a result of the insurance crisis. My home State of Florida is now insuring 1.3 million policyholders. But the States did not ask to be put in this position. They tried to reason with the private insurance companies. They created incentives, they pushed, they urged them not to leave folks high and dry and to keep insurance available and affordable. Even though the insurance industry made record profits the year of Hurricane Katrina, private insurers have still left the gulf coast.

Times of crisis like these often lead to innovative solutions, however. My colleagues, Representative Ron Klein and Representative Tim Mahoney, national insurance risk consortium that will allow States better access to private capital as a backstop for these huge, catastrophic losses. The consortium will help States work together to bundle that risk into bonds that can succeed on the private capital markets. Because this program is voluntary and relies on private investment, the new consortiums should not expose Federal taxpayers to any risk whatsoever. Catastrophe bonds through the consortium will help stabilize insurance markets, bring down premiums, and move forward in providing available, affordable insurance to our constituents.

The bill, with foresight and commonsense, also addresses the worst- case scenario, because, God forbid, there will be another catastrophic event and States will be on the hook to pay claims. And most of the time this will not be a problem, but there are some disasters for which no preparation is enough. In those cases, historically this body, the Congress, has written emergency assistance bills, and it is right that we should do so. But this bill allows States to take control of their own fates by lessening the need for those Federal disaster appropriations by making Federal loans available to help States pay claims when that colossal disaster happens.

This is a compassionate, fiscally responsible way to ensure that Americans are not left without aid in their time of greatest need. This bill is a simple, effective way to tackle the crisis of skyrocketing property insurance. I ask my colleagues to support the rule and the underlying legislation.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I would inquire of the gentleman from Texas if he has any additional speakers.

Then I will reserve the balance of my time. Because I have the right to close, I will wait for the gentleman from Texas to make his closing remarks, and then I will make my closing statement.

Mr. Speaker, we're here on the Homeowners' Defense Act of 2007 and this rule. This is an innovative solution crafted by my very thoughtful colleagues from Florida, Representative Ron Klein and Representative Tim Mahoney, to tackle the rising cost of property insurance.

While the problem is especially acute in the State of Florida, it is not limited to the State of Florida. Look all the way up the coastline from Florida to Georgia, up through New York. Everyone is suffering these double-digit percentage increases in their property insurance bills. Look across the country to California and, yes, to Texas. Florida is not alone and the gulf coast is not alone.

What this requires is some innovative, thoughtful thinking that sometimes is all too often missing here in Washington, but thankfully this new Congress has elected some self-starters who have experience in business and know how business and government can work together to bring real solutions for the American people.

These times of crisis demand innovative solutions, and my colleagues from Florida and the Financial Services Committee that passed this bill in a bipartisan vote, that has brought this to the floor today that we can act on will provide a voluntary, not all States participate, it's a voluntary national insurance risk consortium that will

allow States to tap private capital. Despite the protests from the other side of the aisle, the way this bill is crafted is the taxpayers will not be on the hook for additional disaster claims. To the contrary, this is an attempt to alleviate having to come back to the Congress time and time again in a time of natural disasters.

Now, will we be able to solve natural catastrophes in this bill? No. But is it a smart tool to plan ahead, to try to put some money aside early and create a backstop? Yes.

So I thank all of my colleagues from Florida, especially Representative Klein and Representative Mahoney, because we have got to do something, and this is a simple and effective way to tackle the rising costs for property insurance. I ask my colleagues to support the rule and to support this innovative solution.

I urge a ``yes'' vote on the previous question and on the rule.

The material referred to previously by Mr. Sessions is as follows:

Amendment to H. Res. 802 Offered By Mr. Sessions of Texas

At the end of the resolution, add the following:

Sec. 3. The House disagrees to the Senate amendment to the

bill, H.R. 2642, making appropriations for military

construction, the Department of Veterans Affairs, and related

agencies for the fiscal year ending September 30, 2008, and

for other purposes, and agrees to the conference requested by

the Senate thereon. The Speaker shall appoint conferees

immediately, but may declare a recess under clause 12(a) of

rule I for the purpose of consulting the Minority Leader

prior to such appointment. The motion to instruct conferees

otherwise in order pending the appointment of conferees

instead shall be in order only at a time designated by the

Speaker in the legislative schedule within two additional

legislative days after adoption of this resolution.

(The information contained herein was provided by

Democratic Minority on multiple occasions throughout the

109th Congress.)

The Vote on the Previous Question: What It Really Means

This vote, the vote on whether to order the previous

question on a special rule, is not merely a procedural vote.

A vote against ordering the previous question is a vote

against the Democratic majority agenda and a vote to allow

the opposition, at least for the moment, to offer an

alternative plan. It is a vote about what the House should be

debating.

Mr. Clarence Cannon's Precedents of the House of

Representatives, (VI, 308-311) describes the vote on the

previous question on the rule as ``a motion to direct or

control the consideration of the subject before the House

being made by the Member in charge.'' To defeat the previous

question is to give the opposition a chance to decide the

subject before the House. Cannon cites the Speaker's ruling

of January 13, 1920, to the effect that ``the refusal of the

House to sustain the demand for the previous question passes

the control of the resolution to the opposition'' in order to

offer an amendment. On March 15, 1909, a member of the

majority party offered a rule resolution. The House defeated

the previous question and a member of the opposition rose to

a parliamentary inquiry, asking who was entitled to

recognition. Speaker Joseph G. Cannon (R-Illinois) said:

``The previous question having been refused, the gentleman

from New York, Mr. Fitzgerald, who had asked the gentleman to

yield to him for an amendment, is entitled to the first

recognition.''

Because the vote today may look bad for the Democratic

majority they will say ``the vote on the previous question is

simply a vote on whether to proceed to an immediate vote on

adopting the resolution . . . [and] has no substantive

legislative or policy implications whatsoever.'' But that is

not what they have always said. Listen to the definition of

the previous question used in the Floor Procedures Manual

published by the Rules Committee in the 109th Congress, (page

56). Here's how the Rules Committee described the rule using

information from Congressional Quarterly's ``American

Congressional Dictionary'': ``If the previous question is

defeated, control of debate shifts to the leading opposition

member (usually the minority Floor Manager) who then manages

an hour of debate and may offer a germane amendment to the

pending business.''

Deschler's Procedure in the U.S. House of Representatives,

the subchapter titled ``Amending Special Rules'' states: ``a

refusal to order the previous question on such a rule [a

special rule reported from the Committee on Rules] opens the

resolution to amendment and further debate.'' (Chapter 21,

section 21.2) Section 21.3 continues: ``Upon rejection of the

motion for the previous question on a resolution reported

from the Committee on Rules, control shifts to the Member

leading the opposition to the previous question, who may

offer a proper amendment or motion and who controls the time

for debate thereon.''

Clearly, the vote on the previous question on a rule does

have substantive policy implications. It is one of the only

available tools for those who oppose the Democratic

majority's agenda and allows those with alternative views the

opportunity to offer an alternative plan.

Mr. Speaker, I yield back the balance of my time, and I move the previous question on the resolution.

Mr. Speaker, I demand a recorded vote.

Mr. Chairman, I yield myself such time as I may consume.

First of all, I would like to thank the two gentlemen from Financial Services from Florida for bringing this bill forward.

Mr. Chairman, we are all concerned about insurance rates that are increasing in Florida and other States. Representatives Brown-Waite, Putnam, Buchanan and Feeney have all been very effective and passionate advocates for their constituencies, and I would like to commend them for their hard work.

We can all agree that many States are facing considerable problems with the affordability of homeowners insurance. However, at this point, there is no consensus that H.R. 3355 is the best solution to the problem. In fact, there is quite a bit of disagreement amongst a broad spectrum as to what is the best manner to address this problem. Instead of granting long-term relief to middle-income coastal homeowners confronted with rising insurance costs, this bill could potentially place taxpayers at risk for bailing out insolvent State insurance companies.

In the past few years, some of the largest hurricanes on record tore through the gulf coast and coastal Florida. Some of the affected States have tried to protect their local markets, to limit rate increases, force coverage, or restrict market freedom. Unfortunately, these efforts have had severe unintended consequences and have done little to lower the cost of insurance for consumers. Competition has been reduced and homeowners have been left with fewer choices. Ironically, State initiatives designed to secure more coverage for their constituents have resulted in less affordability.

Florida created Citizens Property Insurance Corporation in 2002 because private insurers have reservations about insuring risky coastal development. While Citizens was supposed to be an insurer of last resort, it is now Florida's largest insurer, with over 1.3 million policyholders, and a total exposure of $434 billion, yet only enough funding to pay approximately $9.4 billion in claims. This undercapitalization means that if a major hurricane hits Florida, Citizens could be bankrupt by hundreds of billions of dollars.

To bring down the cost of insurance even more, Florida created a State reinsurance fund to sell inexpensive reinsurance to private companies to encourage them to write more business in the State. This fund has never had enough cash on hand to pay claims and has driven out the global reinsurance market, recouping losses through taxpayer assessments. According to a Georgetown University report released last summer, the Florida catastrophe fund offers $32 billion in coverage and has $1 billion on hand.

Of the two main titles of the bill, H.R. 3355, the first doesn't add anything new that States cannot already do on their own. The second one makes inexpensive federally subsidized loans available to State insurance companies that are curtailing the private market, resulting in less competition and higher costs to the customer. And I will add here that anytime you're federally subsidizing somebody, that's a cost to every single taxpayer in the country.

The Congressional Budget Office estimates that over the next 5 years implementing this bill would cost $75 million, but even this number seriously underestimates the true cost to the American taxpayers. CBO concluded that few States would actually be interested in these loans and that they would only be made on rare occasions. Nevertheless, taxpayers could potentially be exposed to billions of dollars, leaving them with an enormous cost of capital for the loan's duration and subjecting leaders here in Congress to the inevitable pressure to later forgive loans at the taxpayers' expense.

Mr. Chairman, the federally headed consortium provided for in this bill, while a novel approach, likely offers nothing but an implicit Federal backing for any insured securities, much like the GSEs; not to mention States already have the ability to engage in these pooling arrangements at this day. Further emphasized in the President's Statement of Administration Policy on this bill: ``There is no need for a Federal role because States are currently free to associate to address catastrophic risk.''

It is also debatable whether securitization represents any significant advantages over the sophisticated private reinsurance markets. According to the Georgetown Environmental Law and Policy Institute: ``The mere creation of this consortium would likely skew insurance premiums and encourage unwise development.''

Of concern as well is that the Treasury would make loans to State catastrophe programs. Florida is currently the only State with a reinsurance fund that would qualify for these loans, but there is no doubt that this bill would encourage other States to create these programs, most likely in the Florida mode, further undermining the private market.

The legislation at hand even allows an interim period where other state-run insurers, such as the financially troubled Citizens in Florida, could receive these loans. We should think twice about bankrolling State insurance companies. A Federal loan to an insolvent State catastrophe fund sounds eerily similar to me to the Federal Government's ongoing loan to the

National Flood Insurance Program, which is currently carrying $18 billion in debt.

Republicans will offer a number of critical amendments today to try to steer this debate towards fiscal responsibility, mitigation, and free market competition. We will consider an amendment by Congressman Shays to replace the text of the bill with a bipartisan, blue-ribbon commission to report to Congress specific proposals to improve the affordability and availability of national catastrophe insurance. It would be very prudent of this body to take a step back, allow for further study, and gain a consensus that we do not have on this proposal before us today.

Mr. Chairman, we need to be careful when confronting this very complex issue affecting millions of homeowners that could expose all American taxpayers to huge liabilities, and we shouldn't rush to judgment for an appropriate response.

All of us Members of Congress here know that natural disasters can strike anywhere and everywhere in this country; and by no means are we saying, in opposition to this bill, that we shouldn't have the American response of a helping hand. We just don't feel that this is the right way to do it. We need to work together on bipartisan reforms to address market dysfunction. I think H.R. 3355 falls short on that standard.

There will be many productive ideas put forward this afternoon that will improve the legislation that we're considering; however, if these are not adopted, I would urge my colleagues to vote against this bill.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I would like to yield 3 minutes to the gentleman from Illinois (Mr. Roskam), a member of the Financial Services Committee.

Mr. Chairman, I would like to yield 3 minutes to the gentleman from Florida (Mr. Buchanan).

Mr. Chairman, I yield 3 minutes to the gentlewoman from Florida (Ms. Ginny Brown-Waite) who has been very active on this issue.

Mr. Chairman, I would like to yield 2 minutes to the gentleman from Florida (Mr. Bilirakis).

Mr. Chairman, I would like to point out a couple of things. I represent the State of West Virginia. In our home State for many, many, many years we had a state-run workers comp program, which caused businesses to leave, which caused workers comp rates to rise because of the nature of a state-run insurance company. Maybe this is what is going on in Florida to a certain degree with the catastrophic insurance situation and the state-run insurance company.

The solution we went to in West Virginia is to move workers comp to the private sector to incent private markets to come into our State. Starting January 1, we are going to have competitive bidding on our workers comp and workers comp rate. They are beginning to slide now, and our great hope is that it will become more reasonable as time goes on.

One concern I think that I ought to also raise and that has been raised to me, the Wildlife Federation opposes this bill because of the concerns the gentleman from Ohio alluded to in his statements in terms of the environmental aspects of this bill. Are we encouraging redevelopment in areas, particularly in our very fragile coastal areas, that are in dangerous kinds of environmental situations but also maybe were developed under less stringent rules and regulations?

What kind of protections do we have for our fragile coastal regions in this bill? I think it's a logical question to ask and one that has been brought forth to all of us in the Committee on Financial Services.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, as I have said in my opening statement and some of my comments, I think that this bill presents an implicit Federal backstop for catastrophe insurance to spread the risk. It has potential to cost the taxpayers of this country enormous amounts of money.

Let's just do a scenario where, say in Florida, hopefully this never happens, there is a catastrophe of a hurricane of very large proportions, and Florida goes through all the insurance that is available to them and comes to the Federal Government and asks for a loan. Let's say this catastrophe is of such proportions that Florida looks to their lawmakers and looks to their taxpayers and realizes they can't pay this loan back. What are we going to do here in the United States Congress? We know what we are going to do: we are going to forgive the loan.

I think therein lies one of the big problems in this bill, that it does go to every taxpayer in this country, it does have a formal liability to every taxpayer. Whether it says it explicitly in the bill, it is going to result in that.

My suggestion and some of the suggestions coming from my side of the aisle are going to be, let's step back. Let's do a study. Let's look at this. Let's make sure we have mitigation and let's make sure we are doing this responsibly.

I don't happen to live in Florida, and there are many times during the year when I really wish I did. Although I love living in West Virginia, many West Virginians do live in Florida, by the way, during certain parts of the year, and I know how difficult some of the catastrophes that Floridians suffer are, as well as across the coastline and across the Nation.

This is not about shutting them out or making them not have the ability to be able to insure their properties and live a good, wonderful life in the State of Florida. This is about finding the best solution, not only for Floridians but for the rest of the Nation.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I demand a recorded vote.

Mr. Chairman, I move to strike the last word.

Mr. Chairman, I rise in support of Mr. Roskam's very thoughtful amendment. I feel that it helps to work this bill, which I have obviously voiced some questions about, because it would simply require States to pay their fair share before tapping into a Federal line of credit. This will encourage State funds to handle a predictable level of loss before putting Federal dollars and Federal taxpayers on the hook for what could be billions of dollars in catastrophic loans.

Very briefly, I would like to say, without loss requirements, State reinsurance funds will have no incentive to actuarially price their risk since they will be getting cheap loans to assist them in paying their claims. I would like to voice support for the Roskam amendment.

Mr. Chairman, I yield back the balance of my time.

Thank you, Mr. Chairman.

I yield to the gentleman from Illinois.

I yield to the gentleman from Florida.

Reclaiming my time, Mr. Chairman, I would like to ask the gentleman if he could show us where in the bill it states that the Treasury has that kind of discretion in this particular case.

Did you say page 20, section c?