The American Insurance Association has testified before a New York State Senate committee that many complex questions must be answered before the state considers implementing a catastrophe fund, something it is currently debating.

“Florida is the only state that has a state-run insurance facility for catastrophes,” said Gary Henning, AIA assistant vice president, Northeast Region. “But New York is very different from Florida in a number of important respects. For example, New York's coastal exposure is far less than Florida's, and hurricanes make landfall in New York far less frequently than they do in Florida. In addition, there is currently no evidence of a homeowners' insurance availability problem in New York that necessitates the creation of a cat fund.”

The association also recommended examining several other points before implementing the program. They include determining appropriate retention levels, whether the fund will pay per-storm or on a seasonal basis, and the effects that a state-run cat fund would have on the cost of reinsurance for insurers.