Insurance CEOs put it like this: Unless the country changes the way it handles catastrophes, the next hurricane or earthquake could inflict more economic devastation than last year's Katrina.

According to the Insurance Information Institute, insurance industry leaders at its 10th annual Joint Industry Forum concluded that rigid restrictions are keeping rates artificially low and promoting development in high-risk areas such as Florida, which forces homeowners and taxpayers to subsidize waterfront property owners.

Hanover Insurance Group CEO Frederick H. Eppinger says insurers are pulling back from writing insurance in high-risk locations due to decades of profits drained by Hurricane Katrina claims.

Edward M. Liddy, Allstate chairman, president, and CEO, addressed the need for forward thinking. According to him, the ideal preparation plan for mega catastrophes is to fund the cost of reconstruction before a disaster strikes. He called for a federal program to generate pools funded by entities such as banks and real estate firms, which would provide a back-stop in early years until adequate funds can be accumulated.

State Farm CEO Edward B. Rust, Jr., noted that new technology, such as satellite imaging, helped his company better serve policyholders because it enabled the company to identify damaged properties and issue claim checks before a home had even been examined.

Other factors, such as educating the public on the importance of proper coverage, play a part in mitigating the effects of a catastrophe. Ronald R. Pressman, GE Insurance Solutions' CEO, chairman, and president, considers this educational effort a “long-term investment.”

Special Reports /

Industry CEOs Address Catastrophe Risks

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