Last month, New Jersey Senate Majority Leader Stephen Sweeney reintroduced the New Jersey Consumer Catastrophe Preparedness and Protection Bill, S.2089 (the “Bill”), which, if enacted, would create the New Jersey Catastrophe Fund (the “Fund”).  The Fund would help to pay covered residential property damage insurance claims in the aftermath of a true catastrophe that affects New Jersey homeowners and their property/casualty insurers.  The Bill was originally introduced as A.3236/S.2620 during the 2006-2007 legislative session.

Pursuant to the Bill, the Fund would initially be funded with a $10 million state appropriation and then with an assessment on insurers based on homeowner’s insurance premiums and bond revenues.  The Fund would provide a backstop for insurers against covered catastrophic losses in order to avoid the collapse of the property insurance market should a major natural disaster or other catastrophe befall the state.

Proponents of the Bill argue that New Jersey needs the Fund because the state’s large coastal area is exposed to catastrophic events, such as hurricanes.  Furthermore, the size of the state and its population density makes it highly likely that a Category 3 or better storm could devastate the state.  Proponents further contend that the Fund would help to shore up private sector insurance and reinsurance markets, making property insurance more available and lowering homeowner’s insurance premiums.

Critics of the bill question why tax payers not living in high risk areas should subsidize taxpayers living in high risk areas?  They suggest that rather than a government-sponsored fund, New Jersey should make structural and policy changes, such as enacting building codes and implementing land use planning and disaster recovery planning.

For a copy of the Bill as originally introduced, click here.