A survey taken by the National Association of Realtors shows that almost 2,500 home sales have collapsed -- largely in coastal areas -- solely because potential buyers could not afford the kind of high-cost homeowner insurance that would have protected them and their lenders from losses due to natural disaster.

According to the survey, an estimated 2,450 home sale transactions fell through in 1997 because buyers had difficulties obtaining disaster insurance. The Realtors currently are spearheading efforts to have Congress to come up with a solution to the problem.

In the last decade, disaster upon disaster -- ranging from hurricanes on the East Coast to storm damage and earthquakes on the West Coast -- have wreaked havoc on home and commercial properties built up during the boom years of mid-'80s. Damages have cost insurance companies tens of billions of dollars in repairs.

As a result, in many cases the insurance companies have raised rates to accommodate their risks. In other instances, the companies have either withdrawn from writing coverage in those disaster-prone states, or stopped providing those forms of insurance altogether.

"In a number of states throughout the country, including my home state of North Carolina, consumers are burdened by rate increases as well as by reductions in coverage, such as higher deductibles," Realtor member Barbara Connery testified before Congress.

Connery, of Corolla, N.C., and president of the Outer Banks (N.C.) Association of Realtors, told Congress that the government needed to help homeowners insure themselves against losses due to natural disasters. The NAR currently is backing the Homeowners' Insurance Availability Act (H.R. 21), which would improve the solvency of homeowners' insurance markets by spreading the risk of financial losses from disasters.

In the event of a large natural disaster affecting numerous highly populated areas, the measure would establish a limited, temporary federal reinsurance program to serve as a backstop to existing coverage provided by states and private insurers.

Connery said the inability to acquire homeowner insurance in disaster prone areas had several impacts:

• Homeowners' insurance is a vital component in securing a mortgage and buying or selling a home.
• Homeowners' insurance also can be tied directly to the cost of owning a home. If a homeowner is unable to maintain insurance required by a mortgage lender, the mortgage goes into default.
• If disaster insurance is optional, some will decide not to buy it because it is too expensive, leaving them unprotected.
• Insurance costs also impact renters because higher insurance costs incurred by landlords ultimately are passed along to tenants. Consequently, increased insurance costs result in higher rents.

The Realtors say they support H.R. 21 by Housing Subcommittee Chairman Rick Lazio, R-NY, because it will protect against major catastrophes through its reinsurance plan. The bill also promotes fiscal responsibility by placing the responsibility for shouldering the cost of disaster protection and response on those who are at risk.

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