Enacts the "New York consumers catastrophe preparedness and protection act"; appropriation

2 Co-sponsors

• Owen H. Johnson
• Dale M. Volker

Title of bill

An act to amend the insurance law, in relation to enacting the New York consumers catastrophe preparedness and protection act; to amend the state finance law, in relation to establishing the New York state catastrophe fund; and making an appropriation therefor

Purpose or general idea of bill

To ensure the residents of New York that, in the event of a natural or man-made disaster, the recovery and rebuilding processes following a disaster will be unimpeded and strengthened by creating a catastrophic insurance fund.

Summary of specific provisions

Section 1. - Short title, the "New York Consumers' Catastrophe Preparedness and protection Act".

Section 2. - Findings and purpose.

Section 3. - The Insurance Law is amended by creating a new Article 60. This article establishes reimbursement contracts and premiums, which provide the legal basis for insurance companies to receive payments from the catastrophe fund and premium payments to the fund. Additionally, this section allows for revenue bonds to be issued in the event that the amount of money in the catastrophe fund is insufficient to cover insurers' losses; and, it also establishes an advisory council, comprised of experts from many professions related to disaster preparedness and mitigation, that is specifically charged with developing disaster prevention and mitigation standards and developing a consumer education program.

Section 4. - The state finance law is amended by adding a new § 97-gggg. This new section creates the necessary provisions in the finance law to establish the New York State Catastrophe Fund. This fund is established in the joint custody of the comptroller and the commissioner of the Department of Insurance.

Section 5. - Makes an appropriation of $10,000,000 to the catastrophe fund for its initial start-up.

Section 6. - Enacting clause.

Justification

The current approach to rebuilding from catastrophic events is inadequate to protect New Yorkers from devastating losses because it does not ensure a stable insurance market. A catastrophe, such as Hurricane Andrew in 1993, illustrates a major problem within the market: the possibility that companies will not be able to handle the volume of claims and subsequently become insolvent or leave the market altogether. Our current method of rebuilding in the wake of a disaster leaves relatively little room to compensate for insurance insolvency or providers leaving the insurance market.

While we cannot prevent nature from taking its course, we can prepare before a disaster occurs. The legislation will forge a relationship between government and the private sector that strengthens and builds on the existing private insurance market through the creation of a catastrophe fund. By creating another layer of reinsurance, that is stable and not effected by events that occur outside of the state, or even the nation, the fund will ensure a stable homeowner's insurance market place. The catastrophe fund will protect the economic integrity of the homeowner's insurance marketplace, improve consumer education and improve rebuilding and recovery processes.

Prior legislative history

2006: S.6301/A.9754 - Senate Insurance Committee/Assembly Insurance Committee 2007-08: S.3187 Senate Finance Committee

Fiscal implications

Initially $10,000,000 to establish a base for the catastrophe fund and none thereafter to the State.

Effective date

This act shall take effect on the one hundred twentieth day after it shall have become a law, provided, however, that effective immediately, the addition, amendment or/or repeal of any rule or regulation necessary for the implementation of this act on its effective date is authorized and directed to be made and completed on or before such effective date.