Disaster Leg. Introduced; Insurers Reducing Exposure

By Steven Brostoff, Washington Editor

NU Online News Service, Sept. 15, 4:15 p.m. EDT, Washington?Legislation that would create a federal reinsurance program for natural disasters was introduced in the Senate as the country braced for a potentially major hurricane hitting the East Coast.

Meanwhile, as Hurricane Isabel made its way towards the Carolina Coast, insurers apparently are trying to limit their exposure.

Robert Rusbuldt, chief executive officer of the Alexandria, Va.-based Independent Insurance Agents and Brokers of America, said that IIABA members are informing the association that companies have been notifying them up and down the East Coast that they no longer have authority to bind new homeowners insurance policies.

Mr. Rusbuldt said that depending on damage caused by Hurricane Isabel, there could be a major new effort to enact legislation creating a federal role in natural disaster insurance.

Congress, he noted, loves handing out disaster payments following natural disasters. But he said there likely will be many calls to put a solid natural disaster risk management policy in place.

Under S. 1607, introduced by Sen. Lindsey Graham, R-S.C, the Treasury Department would establish a natural disaster reinsurance program and auction off excess-of-loss insurance contracts to insurers and reinsurers.

The Treasury reinsurance contracts would cover windstorm, earthquakes as well as perils resulting from earthquakes, such as fire and tsunamis. The Treasury Department coverage would be triggered by a once-in-100 year event.

Similar legislation, H.R. 1552, was introduced in the House early this year by Reps. Curt Weldon, R-Fla., and Chris John, D-La.

The insurance industry has been trying for years to enact federal legislation dealing with natural disaster losses, but it has been unable to move a bill or develop a consensus around a single approach.

While some in the industry support the federal government reinsurance proposal, others support a proposal that would allow insurers to establish tax-deferred reserves to cover natural disasters.

Special Reports /

Disaster Leg. Introduced; Insurers Reducing Exposure

Related Stories

Recommended For You