Federal Re Pool CreationShould Require Disclosure

To The Editor:

The property insurance industry is understandably looking forsome help to deal with the unpredictability of potentially billionsof dollars in liability due to terrorist attacks. Not surprisingly,it is looking to the federal government for that help, and theindustry is likely to get it. The public is entitled to certainprotections in return.

Various proposals have been floated by the industrys friends inCongress and the White House. Whether the support takes the form ofa split of liabilities between the industry and government, theformation of a government-backed reinsurance company or thecreation of a catastrophic loss fund, the federal government willbe assuming a substantial new role in the property insuranceindustry. And taxpayers could be liable for as much as $100billion.

If the federal government is to provide the bailout or backstopthat the industry is requesting, many reasonable voices will callfor some form of federal regulation. The industry has spentmillions of dollars fighting such oversight and defending a systemof state regulation that has not proved up to the task in manyareas of consumer protection.

At a minimum, the industry should inform the public about who isbeing served by the industry, and who is not, if it is to get thefederal protection it is seeking. Specifically, this meansrequiring Home Mortgage Disclosure Act-like disclosure for theproperty insurance industry.

Under the HMDA, most mortgage lenders are required to publiclydisclose:

Information on the race, gender, and income of allapplicants.

Whether the application was approved.

The type (conventional, government insured) and purpose (homepurchase, improvement) of the loan.

All of this information is made available at the census-tractlevel. (The Federal Reserve Board is considering new rules thatwould require disclosure of the annual percentage rate of allloans.)

For property insurance, the picture is quite different. Onlyeight states collect any insurance disclosure data at all, and ineach case they are collected at the ZIP code rather thancensus-tract level. No race, gender or income data are reported.Data on individual insurers are available in just four of thesestates. The rest provide aggregate data on the larger insurers inthe state.

If the federal government, which means all taxpayers, is toassume the major potential liabilities the industry is requesting,such disclosure constitutes the minimum oversight that should berequired. It is time to let the sun shine in on the propertyinsurance industry.

Gregory D. Squires

Chair

Department of Sociology

George Washington University

(Note: Mr. Squires is also co-author of “Color and Money:Politics and Prospects for Community Reinvestment in UrbanAmerica,” published by SUNY Press in 2001.)

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, November 12, 2001.Copyright 2001 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

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