Occasionally I get asked about the challenge of maintaining themomentum for positive change within the property insurance marketin a year when hurricane season is relatively mild or catastrophiclosses are not extreme. It is true that over time the sense ofurgency from policymakers and the public can dissipate as thememories of the last major storm or crisis fade. However, at thesame time the biggest benefit from a fairly normal year like 2014is time.

The insurance industry use these periods to stress topolicyholders the importance of preparing their homes for naturaldisasters and becoming both physically and financially ready forwhatever Mother Nature has in store. Additionally, insurers can usethe years when hurricanes do not hit or cat losses are moderate tobuild up capital reserves so they can afford to pay claims whenevents do occur. The quiet years also allow policymakers time todevelop longer-term solutions that can ultimately strengthenhomeowner insurance markets.

The enactment and enforcement of tough standards for buildingcodes, property development and other loss prevention andmitigation requirements are key components to long-term naturalcatastrophe preparation and are issues we always like to seeadvanced. As an example, following devastating tornadoes in 2013that ravaged central Oklahoma, this March the City of Moore tookaction and became the first in the nation to adopt building codesthat are specifically designed to address the impact of tornadoes.According to the city, Moore's new residential building codesinclude requiring roof sheathing, hurricane clips or framinganchors, continuous plywood bracing and wind-resistant garagedoors. The homes will be built to withstand winds up to 135 milesper hour rather than the accepted standard building requirements of90 miles per hour.

However, it can take several years to achieve significantreforms and the enactment of statewide building codes is often anissue that requires a sustained, multi-year effort to achieve thegoal.

Mississippi is a case in point. Just this November, the stateimplemented its first statewide building code after several yearsof work. These new standards, which became effective Nov. 28, couldpotentially save lives, reduce damage after a major weather event,and reduce insurance costs. The stronger building code will helpprotect people and their properties by ensuring that residentialand commercial buildings are now built to withstand greaterhurricane force wind and impact from flying debris.

For many years, the risk of loss from natural catastrophes wasfairly predictable and relatively manageable. But more recently,stronger and more frequent windstorms have elevated this risk,affecting all coastal regions and other parts of the country.

According to data from the National Oceanic andAtmospheric Administration, the Southeast has experienced morebillion-dollar disasters in the past 30 years than the rest of thecountry combined. Over this time the region and coastal states suchas Florida have experienced record-setting hurricanes, whileinterior and northern states in the region also weathered sizeablenumbers of tornadoes and winter storms.

This is why it was so important this year for states likeAlabama, Mississippi and Texas to explore ways to strengthenbuilding codes that can protect residents from excessive damage inthe event of severe weather.

As mentioned previously, the biggest victory for consumers thisyear came in Mississippi where Insurance Commissioner Mike Chaney,Governor Phil Bryant, the legislature and the insurance industryworked diligently to enact S.B. 2378 and put in place a statewidebuilding code. The Property Casualty Insurers Association ofAmerica (PCI) and its members have been working to push forstronger building codes since 2005, when the state was hit byHurricanes Katrina, Dennis, and Rita. According to the August 2013report issued by the Insurance Institute for Business and HomeSafety, Mississippi had the weakest building standards of allhurricane prone states.

Meanwhile in Texas, the House Insurance Committee and the Landand Resource Management Committee held hearings to examine coastalresiliency, hazard mitigation, building codes and the role ofinsurance in protecting the coast. Although Texas has good codeenforcement in some coastal areas, it can be less stringent inother areas. For greater consumer protection, PCI is urging thatthe code be made mandatory for the entire area and that thestatewide building code be updated.

While building code legislation did not pass in Alabama,lawmakers seriously considered adopting H.B. 614, which was verysimilar to the law enacted in Mississippi. Although the bill wasintroduced late in the regular session, there was healthydiscussion regarding the importance of adopting minimum statewidebuilding code standards.  It is anticipated that buildingcode legislation will be reintroduced during the 2015 Session andPCI will be strongly supporting its passage.

Alabama is no stranger to extreme weather conditions and with along history of devastating catastrophes, it has had its share ofhurricanes, tornadoes, flooding and severe storms. The April 27,2011, tornado outbreak, which was part of a series of destructivetornadic activity from April 25-28 across the eastern third of thecountry, was unimaginable. Among the various states ravaged, thecentral and northern Alabama regions were the hardest hit with 235fatalities.  Alabama's outbreak alone—its deadliest since1932—is now ranked among the top 10 worst natural disasters in U.S.history, resulting in more than $4 billion in insured lossesprimarily in the Tuscaloosa, Birmingham and Huntsville metropolitanareas. Additionally, Alabama experienced damage from otherrecord-setting storms such as hurricanes Gustav in 2008, Katrinaand Rita in 2005 and Ivan in 2004. 

While the frequency and severity of weather events cannot becontrolled, something can be done to help control the cost impacton consumers. As was done in other states, it is now Alabama's timeto address its vulnerability to catastrophic losses and takeproactive steps towards ensuring a healthy and competitive privatehomeowners market. In turn, homeowners insurance will become moreavailable and affordable for Alabama's residents. 

Loss mitigation (i.e., actions to reduce disaster losses) shouldbe at the forefront of any property insurance solution as the statepromotes public safety, minimizes property damage, and preservescommunities hit by natural disasters. According to a study by theUniversity of Pennsylvania's Wharton School of Business, futurehurricane losses could be reduced by as much as one-third ifappropriate mitigation steps are taken. 

With 2014's legislation, it is important to build upon themomentum and push for stronger building codes and encourage thehardening of residences. More property carriers will be persuadedto operate in Alabama and invest capital in the state. Increasingconstruction standards to make buildings more resistant to damagewill decrease the frequency and severity of property claims overtime and provide a positive stabilizing effect on costs. Lesseramounts of property damage from a natural disaster speeds up therecovery process, causes less disruption for property owners andputs less pressure on the insurance marketplace.

Clearly, a uniform statewide building code would minimize theimpact a natural disaster has on overall losses and premiums andthe availability of insurance, and be a positive contribution toAlabama's long-term economic growth.

Jeffrey Brewer is assistant vice president at PropertyCasualty Insurers Association of America (PCI). He has nearly 15years of experience in the insurance industry and leads PCI's statepublic affairs activities.