Earthquake Risk, Insurance, and Recovery: Issues for Congress

Rawle O. King
Analyst in Financial Economics and Risk Assessment

This report examines earthquake catastrophe risk and insurance in the United States in light of recent developments, particularly the devastating earthquakes in Haiti and Chile. It examines both traditional and non-traditional approaches for financing recovery from earthquake losses as well as challenges in financing catastrophe losses with insurance. The report explores the feasibility of a federal residential earthquake insurance mechanism and assesses policy implications of such a program. 

So far in the 111th Congress, six bills have been introduced that would broaden the federal government's role in insuring, mitigating, and financing recovery from natural catastrophes. Proposals include (1) establishing a national consortium to allow states to aggregate risk from state-sponsored insurance pools and transfer such risks to the capital markets through catastrophe bonds (H.R. 2555/S. 505), (2) a provision for a tax-free accumulation of reserves to pay catastrophe losses (H.R. 998/S. 1486), (3) a Treasury program to guarantee state-issued debt (H.R. 4014/S. 886), (4) a federal reinsurance backstop (H.R. 83), (5) a provision to establish individual catastrophe savings accounts (S. 1484), and (6) establishing a bipartisan commission to examine catastrophe risks and make recommendations for the management and financing of such risks (S. 1487). On March 10, 2010, the House Subcommittee on Housing and Community Opportunity and Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises held a joint hearing on H.R. 2555. A mark up on H.R. 2555 is expected in April 2010.


Date of Report: March 12, 2010
Number of Pages: 16
Order Number: R41109
Price: $29.95

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