Shelley Capito

Mrs. CAPITO

Mrs. CAPITO. 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.

Mrs. CAPITO. Mr. Chairman, I have no opposition to Mr. Matheson's amendment. I just want to go back to the last point we were taking about with Mr. Manzullo, the gentleman from Illinois. His amendment was putting forth the fact that if there is a loan to the State under these provisions that if they were in default or were not repaying their loan that there shouldn't be any further loans. And the gentleman offered me a clarification by reading me some text. On further looking at the text, yes, the text does say that the Secretary of the Treasury requires full payment of the loan; but it also says that the Secretary can then determine that if full repayment is not made or is unlikely to be made, that the only punishment or the only enforcement mechanism is the Secretary will then submit a report to the Congress explaining why repayment is not being made. It does not state in here, at least to my mind in the way I read it, that that State would be precluded from being able to attain another or further loan under the provisions of this bill. I appreciate the opportunity to make that clarification. I think it strengthens Mr. Manzullo's amendment, which I fully support. And, again, I thank the gentleman for his indulgence.

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

Mrs. CAPITO. Thank you, Mr. Chairman. I yield to the gentleman from Illinois.

Mrs. CAPITO. I yield to the gentleman from Florida.

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

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

Mrs. CAPITO. Thank you.

Mrs. CAPITO. Did you say page 20, section c?

Mrs. CAPITO. I yield to the gentleman from Florida.

Mrs. CAPITO. 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.

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

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

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

Mrs. CAPITO. 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.

Mrs. CAPITO. 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.

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

Mrs. CAPITO

Mrs. CAPITO. Yes, in its current form I am.

Mrs. CAPITO. Mr. Chairman, I yield back my time.

Mrs. CAPITO. I yield to the gentleman from Connecticut.

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

Mrs. CAPITO. Mr. Speaker, on that I demand the yeas and nays.

Mrs. CAPITO. Mr. Speaker, I demand a recorded vote.

Mrs. CAPITO. Mr. Speaker, valid questions have been asked about this, and this bill could make West Virginians and other taxpayers across America liable for what the bill says itself, hundreds of billions of dollars in loans and subsidized insurance to State insurance companies that are displacing the private sector and charging inadequate rates. It is unclear how much this bill will actually cost the taxpayers. The Congressional Budget Office has said at least tens of millions of dollars if fully implemented, and it could have been higher by several magnitudes if they thought that States would actually use the provisions of the bill with any meaningful frequency. Now the manager's amendment has added up to 200 billion more dollars in taxpayer exposures that would not be repaid. There is no sunset on this bill, and this is a permanent liability for the taxpayers. The hard facts are that the bill itself recognizes that taxpayers could be asked to cough up enormous sums of taxpayer dollars. Another consideration is the environment. The National Wildlife Foundation and the Florida Coalition for Preservation oppose this bill because they say it ``would result in continued encouragement of risky development in our Nation's coastal areas and floodplains. With more development in these environmentally sensitive areas, this bill could lead to more loss of life, property, and of wildlife habitat. The safety of our citizens should be the number one priority of any government program dealing with natural disasters. The administration says that H.R. 3355 would ``displace the private market,'' ``clearly result in a subsidy for insurers, State insurance programs, and their policyholders,'' ``undermine economic incentives to mitigate risks,'' ``be fiscally irresponsible as the Federal Government could expect to face steep losses in certain years,'' and that ``financing these losses would require Federal taxpayers to subsidize insurance rates for the benefit of those living in high-risk areas. Mr. Speaker, this amendment simply says, if we are going to put taxpayers on the hook for billions of dollars in loans Treasury will be forced to give under this bill, then we should also make a commitment that homeowners who do not live on the coast will not have to pay for this subsidy in the form of increased insurance rates. One group of taxpayers should not be compelled to cover the inherent costs of risky, high-priced coastal development for developers. Without this amendment, homeowners, who are taxpayers too, would be hit twice. First, they would essentially guarantee these loans in the event States default, and according to Treasury, ``it is more than likely that there will be significant pressures to forgive outstanding debt in the case of a huge catastrophe'' and that ``taxpayers nationwide subsidize insurance rates in high-risk areas, which would be both costly and unfair.'' Second, the extension of these loans will implicitly subsidize high- risk areas at the expense of other homeowners. When a State repays these loans, it could assess a fee or tax on all homeowners in the State, including those who don't receive the benefit of this subsidy. Also, the State insurance companies that stand to gain from this bill squeeze out private insurers, meaning less competition for consumers, higher prices, and fewer choices. On October 10, a Wall Street Journal editorial put it this way: Congress is volunteering ``middle-class taxpayers nationwide as the financial backstop for beachfront properties.'' Mr. Speaker, this bill does nothing to address the development and zoning that could be encouraged with these new programs. We can add mitigation and other requirements. The fact is, if the Federal Government is making something cheaper, you're probably going to buy more of it and do more of it. Today, with this bill, we are giving a gift to coastal development and dysfunctional State agencies at the expense of Middle America. Homeowners all over the country have been hit hard lately; and for the millions of taxpayers who do not live in these areas, this bill would be another blow. My amendment simply ensures that we will be mindful of the vast majority of homeowners and taxpayers who, like West Virginians, do not stand to benefit from this bill at all. Mr. Speaker, I yield back the balance of my time.

Mrs. CAPITO. Mr. Speaker, I offer a motion to recommit.