Property-casualty insurers can handle up to $40 billion of annual catastrophe losses, and $65 billion over a two-year period, the American Academy of Actuaries said today.

In preliminary findings prior to the release of a report sometime in the next several weeks, the Academy said any program of federal supports should be based on those capacity projections.

Shawna Ackerman, co-chair of the Academy's Natural Catastrophe Subcommittee, outlined plans for the group's involvement with the joint National Association of Insurance Commissioners-National Conference of Insurance Legislators effort to develop a plan to deal with natural catastrophe risk.

In a letter to Florida Sen. Steve Geller, D-Hallandale Beach, who chairs NCOIL's natural catastrophe panel, the Academy pledged its aid in work on the model.

Ms. Ackerman said gauging market capacity is critical to developing a final plan.

"Private market capital is leveraged to support multiple lines of insurance, and if exhausted, would impede the ability of the insurance industry to continue writing all lines of insurance," she wrote.

Thus, the threshold for public involvement must be at a level below that which would exhaust private market capacity, and yet not compete with private industry, she wrote.

Loss mitigation measures must also play a role in any new state-federal catastrophe risk plan. "Engineering studies, as well as recent experience in Florida, illustrate the ability of strong building codes to significantly reduce losses over what would otherwise occur," Ms. Ackerman wrote.

Special Reports /

Actuaries: P-C Insurers Can Handle $40B Cat Hit

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