The American Insurance Association has testified before a NewYork State Senate committee that many complex questions must beanswered before the state considers implementing a catastrophefund, something it is currently debating.

“Florida is the only state that has a state-run insurancefacility for catastrophes,” said Gary Henning, AIA assistant vicepresident, Northeast Region. “But New York is very different fromFlorida in a number of important respects. For example, New York'scoastal exposure is far less than Florida's, and hurricanes makelandfall 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 thecreation of a cat fund.”

The association also recommended examining several other pointsbefore implementing the program. They include determiningappropriate retention levels, whether the fund will pay per-stormor on a seasonal basis, and the effects that a state-run cat fundwould have on the cost of reinsurance for insurers.