NU Online News Service

State lawmakers have reacted favorably to a proposedpublic-private approach to cover natural catastrophe risks toolarge for the private market to handle by itself.

California Insurance Commissioner John Garamendi made the annualmeeting in San Diego of the National Conference of InsuranceLegislators his first stop last Thursday in an effort to promotehis plan for a private, state and federal layered approach toensure consumers are protected in the event of a so-calledmega-catastrophe.

Texas Rep. Craig Eiland, D-Galveston, attended the two-dayNational Catastrophe Insurance Summit earlier in the week in SanFrancisco and thus had a good grasp of the details proposed.

A key component of the proposal will be the creation ofsomething akin to state catastrophe funds to provide a state layerof protection. "I think this will go well in the states," Rep.Eiland said. "The important question is whether Congress will buyinto it."

Incoming NCOIL president and North Dakota State Rep. Frank Wald,R-Dickinson, said he did not buy the notion that Midwest residentswould somehow feel slighted in having to fund the protection ofpeople living on the catastrophe-prone coasts with premiumincreases. "Don't forget, we get plenty of help from the federalgovernment in terms of farm subsidies and such, and we have our owndisasters," he said.

Florida State Sen. Steve Geller, D- Hallandale Beach, alsoattended the summit and said he would work to revise NCOIL's ownnatural disaster proposal, adopted last year, to align it more withthe proposal that came out of the summit.

Most members, however, were unaware of the plan and could notcomment.

At an NCOIL forum on Saturday, the general consensus was thatefforts to find a permanent market solution to cover terrorism riskshould not be lumped together with efforts in the naturalcatastrophe area.

Representatives from the Property Casualty Insurers Associationof America and the National Association of Mutual InsuranceCompanies said their member companies' positions on whether naturalmega-catastrophe risk coverage needs state and federal backstopswere evolving, and thus could be open to a proposal such as the onethat emerged from the summit earlier in the week.

But Tammy Valesquez of the American Insurance Association saidthe industry currently had enough capacity for such risks withoutgovernment intervention.

Franklin Nutter, president of the Reinsurance Association ofAmerica, warned that such government intervention comes with aprice, such as increasingly higher attachment points andmake-available mandates.

In addition, he disputed the notion that a more fully insuredpopulation hit by a catastrophe would seriously lessen the need forthe kind of federal aid showered on the Gulf Coast in the wake ofKatrina.

"This aid was for things like infrastructure and immediatedisaster relief, and not for the most part to homeowners who didnot have insurance," he said.