NU Online News Service

State lawmakers have reacted favorably to a proposed public-private approach to cover natural catastrophe risks too large for the private market to handle by itself.

California Insurance Commissioner John Garamendi made the annual meeting in San Diego of the National Conference of Insurance Legislators his first stop last Thursday in an effort to promote his plan for a private, state and federal layered approach to ensure consumers are protected in the event of a so-called mega-catastrophe.

Texas Rep. Craig Eiland, D-Galveston, attended the two-day National Catastrophe Insurance Summit earlier in the week in San Francisco and thus had a good grasp of the details proposed.

A key component of the proposal will be the creation of something akin to state catastrophe funds to provide a state layer of protection. "I think this will go well in the states," Rep. Eiland said. "The important question is whether Congress will buy into it."

Incoming NCOIL president and North Dakota State Rep. Frank Wald, R-Dickinson, said he did not buy the notion that Midwest residents would somehow feel slighted in having to fund the protection of people living on the catastrophe-prone coasts with premium increases. "Don't forget, we get plenty of help from the federal government in terms of farm subsidies and such, and we have our own disasters," he said.

Florida State Sen. Steve Geller, D- Hallandale Beach, also attended the summit and said he would work to revise NCOIL's own natural disaster proposal, adopted last year, to align it more with the proposal that came out of the summit.

Most members, however, were unaware of the plan and could not comment.

At an NCOIL forum on Saturday, the general consensus was that efforts to find a permanent market solution to cover terrorism risk should not be lumped together with efforts in the natural catastrophe area.

Representatives from the Property Casualty Insurers Association of America and the National Association of Mutual Insurance Companies said their member companies' positions on whether natural mega-catastrophe risk coverage needs state and federal backstops were evolving, and thus could be open to a proposal such as the one that emerged from the summit earlier in the week.

But Tammy Valesquez of the American Insurance Association said the industry currently had enough capacity for such risks without government intervention.

Franklin Nutter, president of the Reinsurance Association of America, warned that such government intervention comes with a price, such as increasingly higher attachment points and make-available mandates.

In addition, he disputed the notion that a more fully insured population hit by a catastrophe would seriously lessen the need for the kind of federal aid showered on the Gulf Coast in the wake of Katrina.

"This aid was for things like infrastructure and immediate disaster relief, and not for the most part to homeowners who did not have insurance," he said.

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