Obama Backs National Cat Fund

Democratic presidential candidate Barack Obama offered his support to a proposed national catastrophe fund, provided it does not also encourage risky development.

“I think that we need a national catastrophe fund,” Sen. Obama said in an interview with the Palm Beach Post. “The key is to make sure that it's run efficiently, that it’s adequately funded, and that we build in smart incentives to assure that developers are mitigating risk when they're making decisions on where to locate homes or businesses.”

Sen. Obama referred to legislation passed by the House to implement a national catastrophe fund as a “good start.” The legislation, the Homeowners Defense Act, or HR 3355, is currently awaiting action by the Senate Banking Committee.

He added that there are “a number of ways” to encourage developers to mitigate their risks as much as possible, and that “the key is to make sure you're not setting up a fund where developers don't have to have any regard as to whether they're building in a flood plain or whether they're creating more risky situations.”

The national catastrophe fund is one seen as favorable to Floridians, and the legislation passed by the House was sponsored by two Florida representatives. Sen. Obama compared the situation facing homeowners in the sunshine state to those living in other parts of the country.

“The bottom line for the residents of Florida is they need protection in the same way that people in the Midwest need protection from tornadoes or other natural disasters,” he said. “And I think its important for us to make sure the federal government is playing a role as a backstop in that process.”

Edward Collins, national director of Protectingamerica.org, a group lobby for the national catastrophe fund concept, hailed Sen. Obama’s support for the proposal.

“There is urgency as we are reminded by the recent forecast that major catastrophes are, unfortunately, inevitable,” he said. “Fortunately, however, a growing number of leaders are calling for reforms. Senator Obama rightfully realizes that catastrophe preparation and protection must be a nationwide priority and that action should be taken immediately, before the next catastrophe strikes.”

ProtectingAmerica.org has called for a national catastrophe fund to be established as a backstop for state guaranty pools and funded using mandatory contributions from insurance companies.

Opponents of the concept have argued that the bill would effectively force homeowners in low-risk areas to subsidize those in coastal regions prone to hurricanes and other storms.

During the House debate on the legislation, Rep. Shelley Moore-Capito, R-W.Va., said the bill “could put the taxpayers at risk for bailing out” state insurance pools, pointing to Florida’s state-run Citizens Property Insurance Corp. as an example.