Mr. President, I rise today to introduce the Earthquake Insurance Affordability Act. This bill makes important changes that will increase availability and reduce cost of catastrophic insurance for homeowners in California and other…
Mr. President, I rise today to introduce the Earthquake Insurance Affordability Act. This bill makes important changes that will increase availability and reduce cost of catastrophic insurance for homeowners in California and other earthquake-prone Sstates.
The tragedy and devastation of the recent 9.0 earthquake in Japan was a real wakeup call for many of us. You see, the people of Japan are keenly aware of the risks of earthquakes. Every year, thousands of people participate in earthquake drills, and their building codes are the most advanced in the world. Japanese seismologists have the most sophisticated technology and monitoring systems. But all of this did little to protect them from an earthquake of this magnitude.
The people of California and much of the West Coast face a similar risk. The United States Geological Survey predicts a 99.7 percent chance that a magnitude 6.7 earthquake will strike in California in the next 30 years. The agency also predicts a 46 percent chance that a magnitude 7.5 percent or higher earthquake will strike California in the next 30 years.
The 2008 ShakeOut Scenario conducted by the US Geological Survey and FEMA modeled a 7.8 earthquake on the southern San Andres Fault. Though that quake was only 1/10th the size of the recent event in Honshu, Japan, FEMA estimated that a 7.8 earthquake in Los Angeles would result in 2,000 deaths and an economic loss of $213.3 billion.
The simple fact is that we cannot prevent earthquakes, so we must be prepared in the event one does occur. That is the only way we will be able to respond and recover quickly.
That is why I am introducing the Earthquake Insurance Affordability Act. This legislation allows non-profit state-run disaster insurance programs to receive federal guarantees if they need access to credit in the aftermath of a catastrophic disaster. Access to credit is critical in the immediate aftermath of disasters because the market will likely be disrupted and private institutions will be reluctant to lend the large sums necessary to facilitate a quick and meaningful recovery.
This Federal guarantee will be limited. The Secretary of Treasury must certify that recipients of each of the loan guarantee are able to repay debts within a reasonable timeframe. Moreover, my legislation ensures that the cost of the program is born by state programs, not the federal taxpayer. The Congressional Budget Office has estimated that my bill comes at no cost to the taxpayer.
But this legislation is about more than just access to credit--it will guarantee homeowners have access to affordable earthquake insurance coverage. This means homeowners will be able to quickly rebuild in the aftermath of an earthquake.
This legislation is necessary because most homeowner insurance policies do not cover earthquakes. In California, for instance, most homeowner insurance policies cover fire damage but not damage caused by earthquakes.
As a result, homeowners are often put in the position of either having to purchase expensive supplemental insurance or leaving their homes uninsured against these risks.
In order to help promote coverage for these risks, many states and the Federal Government have set up supplemental insurance programs that offer this coverage at affordable rates.
At the Federal level, the National Flood Insurance Program offers flood insurance to residents living in flood plains where private insurance is unavailable or too expensive.
Similar State-level programs exist in California, Florida, Texas, and other states to help residents protect their homes against catastrophic disasters. In my state, The California Earthquake Authority, CEA, was set up after the devastating 1994 Northridge earthquake to make earthquake insurance more affordable.
Unfortunately, many of these programs are not fully utilized. The California Earthquake Authority insures 70 percent of homeowners who purchase earthquake insurance in my state, but only 770,000 homeowners in California opted to buy such insurance. That means only 12 percent of Californians will be covered up if an earthquake hits.
The reason for such low use in that premiums and deductibles remain too high for the average consumer. A policy covering a $400,000 home and $60,000 of its contents costs an additional $1,105 per year, and that's on top of normal homeowners insurance. Even worse, with such high deductibles, policyholders must suffer near total collapse before they receive any payout. For most, this just isn't a good deal.
The reason for high-cost, high-deductible policies is that the CEA is forced to spend nearly $200 million each year to purchase reinsurance. This ensures that in the event of a major catastrophe, the CEA will still be able to pay out all of its claims. It is good policy for the CEA to incur this expense, and I commend their responsible business practices.
However, since 1994 the California Earthquake Authority has paid $2.5 billion in reinsurance premiums and only received back $250,000 in claims. It doesn't take a savvy businessman to see this isn't a good investment. But with minimal changes to federal law, the CEA and other state-run insurance programs can drastically reduce the
need for expensive reinsurance and substantially decrease the cost of their products.
The Earthquake Insurance Affordability Act makes these changes, allowing programs like the California Earthquake Authority to access sufficient capital following a disaster.
Let me be clear: this is not a bailout or a handout for states. The California Earthquake Authority is independent from the state and financially stable.
This bill would increase insurance coverage in California and the rest of the country and help consumers deal with losses that will occur when the next major disaster strikes.
Over the first 5 years this legislation is in effect, nearly half a billion dollars in reinsurance costs would be saved and passed along to consumers.
The California Earthquake Authority could cut premiums by 30 percent or deductibles by 50 percent.
This could result in at least 700,000 new California homeowners purchasing earthquake insurance.
Following major disasters, the federal government spends millions of dollars, and often billions, cleaning up the mess.
Katrina cost FEMA $7.2 billion.
The Northridge earthquake cost FEMA $7 billion.
Hurricane Andrew cost FEMA $1.8 billion.
By enacting the Earthquake Insurance Affordability Act and increasing the number of individuals with insurance, the cost of disaster recovery to the Federal Government could be substantially lower.
This is because FEMA cannot make payments to individuals who have insurance coverage. Therefore, every family that purchases earthquake insurance as a result of this bill, is one less family that FEMA may have to support when disaster strikes.
The bottom line is this: the next big earthquake is coming and we are not prepared for it. Families need to make sure they have earthquake preparedness plans, and homeowners need to evaluate the best ways to protect their homes. Structures need to be strengthened and all new buildings must be built to the highest standards. The Federal Government must also do its part, to help facilitate this preparedness.
The Earthquake Insurance Affordability Act will make great strides to help our country prepare for a major earthquake, and it does so without burdening the federal taxpayer. I urge my colleagues to quickly adopt this critical piece of legislation and help us better prepare for tragedy.
Mr. President, today Senator Kyl and I are introducing two bills that will assist with alleviating the costs of illegal immigration for State and local governments--the SCAAP Reauthorization Act and the SCAAP Reimbursement Protection Act of 2011.
We are joined by Senators McCain, Schumer, Boxer, and Hutchison.
Immigration is a federal responsibility, as is securing the Nation's borders. When the Federal Government fails to prevent illegal immigration, as it has for some time now, it needs to take responsibility for the consequences of this failure.
However, the burden of incarcerating illegal aliens who commit crimes in our country has fallen largely to the States, and it weighs heavily on them, especially during this time of economic uncertainty. Last year, the State of California spent an estimated $1 billion to incarcerate criminal aliens.
Understanding the expenses that States and localities bear, Congress enacted the State Criminal Alien Assistance Program, SCAAP, in 1994 as part of the Violent Crime Control Act. The program was designed to help reimburse States and local governments for the costs of incarcerating criminal aliens, and was last reauthorized in 2006 as part of a Department of Justice Reauthorization bill. The SCAAP Reauthorization bill that I am introducing today will reauthorize the program for an additional four years, until fiscal year 2015.
The second bill that we are introducing today is necessary to fix a switch in interpretation by the Justice Department.
Prior to 2003, the Department of Justice interpreted the SCAAP statute to include reimbursement to States and localities for incarcerating undocumented criminal aliens who have been accused or convicted of State and local offenses, and have been incarcerated for a minimum of 72 hours. However, in 2003, DOJ changed its interpretation, and began limiting reimbursement to the amount States and localities spend incarcerating convicted criminal aliens for at least 4 consecutive days.
Reimbursing States and localities only for the costs when a criminal alien is convicted and incarcerated for 4 consecutive days significantly undermines the goal of SCAAP that States and localities should not bear the burden of a broken Federal immigration system. The actual costs of this failed Federal system begin when these aliens are charged with a crime, transported, and incarcerated for any length of time.
This narrow interpretation by the Justice Department is even more devastating because SCAAP is consistently under-funded. The President's fiscal year 2012 budget request for SCAAP represents a 59 percent reduction below the fiscal year 2010 level and is far short of meeting the actual reimbursement costs of most States. As a result, SCAAP only reimburses States for a fraction of the costs of incarcerating criminal aliens. In 2009, Los Angeles County alone spent $116.6 million to house undocumented felons and received only $15.4 million in reimbursement payments.
The SCAAP Reimbursement Protection Act of 2011 will fix this problem by making it clear that States can be reimbursed for the full costs of incarcerating aliens who are either charged with or convicted of a felony or two misdemeanors.
When the Federal Government does not reimburse States and local governments for the costs of incarcerating criminal aliens, it is at the expense of local services and law enforcement. American communities simply cannot afford to shoulder the weight of our immigration policies.
Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.
Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.