November 13, 2008

Nation’s Catastrophe Experts say Earthquake Preparation will Require Financial Backstop

Applaud earthquake exercise but say prefunded backstop needed

 (Washington, DC) Preparing for a massive earthquake in California will require more than practice drills and emergency response scenarios, it will require the enactment of a privately funded financial backstop program designed to assure that victims of such catastrophes have the resources to repair, rebuild and recover after a sweeping earthquake strikes, according to ProtectingAmerica.org, the nation’s largest coalition of first responders, disaster experts and businesses concerned with catastrophe preparation and protection.

'The disaster simulation and drills that were organized today are a critical step in helping to assure that fatalities and physical harm can be kept to a minimum when a massive earthquake strikes, but they are only part of the preparation that is needed to fully protect our families,' said Brad Brewster, National Director of ProtectingAmerica.org.

'Significant and substantial financial resources will be required for our families to be able to rebuild, repair and recover in the aftermath of a devastating earthquake.  A privately funded financial backstop that uses insurer deposits to pre-fund coverage for such an event may be the most important financial preparation we can take,' he said.

Insurance modelers have predicted that a replay of the San Francisco Earthquake of 1906 could cause an estimated $400 billion in damages if it occurred today.  Risk Management Solutions (RMS) released a report last week indicating that a magnitude 7.0 earthquake that strikes on the Hayward Fault would cause economic damages of between $210 and $235 billion.

'A pre-funded national catastrophe fund would stand as a backstop to the private insurance market and would help assure that resources to cover enormous losses like those predicted by modelers would be covered,' Brewster said.

The US House of Representatives, at the urging of House Speaker Nancy Pelosi, passed legislation to create a national catastrophe fund in November 2007.  The measure, HR 3355, the Homeowners’ Defense Act of 2007, passed with a bipartisan vote of 258-155.  The US Senate has yet to vote on the measure.

President-elect Obama indicated his support for the measure and the party platform of the Democratic National Committee specifically endorsed the measure.

'We are hopeful that the political will has reached the point where the establishment of national catastrophe fund will be a top priority early in the next session of Congress.  Clearly, the time to act is now.  We simply cannot wait for another financial collapse requiring another massive taxpayer bailout,' he said.

'Today’s exercise in Southern California should be an important signal to everyone in Washington that a national financial backstop is an essential element to adequately protecting our families and the American taxpayers,' Brewster added.

About ProtectingAmerica.org

ProtectingAmerica.org was formed in 2005 and is a non-profit organization consisting of emergency management officials, first responders, disaster relief experts, insurers and others.  Its members include the American Red Cross, the International Association of Fire Fighters, more than 300 other organizations and businesses and more than 15,000 individuals from across the nation.

The non-partisan organization is chaired by James lee Witt and Admiral James M. Loy.  Mr. Witt served for eight years as the director of the Federal Emergency Management Agency.  Admiral Loy was formerly the deputy secretary of the US Department of Homeland Security and formerly served as commandant of the United States Coast Guard.

At the core of ProtectingAmerica.org’s mission is the establishment of a comprehensive, integrated national catastrophe management solution that will better prepare and protect American families, communities, consumers and the American economy from catastrophe.  Among its efforts to support this mission, ProtectingAmerica.org is working to increase public awareness and consumer education; advocate for better coordination with local, state and federal mitigation and recovery efforts, and strengthen emergency response and financial mechanisms to rebuild after a major catastrophe.