ORLANDO–The nation's insurance regulators hope to have proposals for a federal catastrophe program ready by the start of 2007 at the latest, according to Florida Insurance Commissioner Kevin McCarty, speaking at an industry conference here.

Mr. McCarty said the National Association of Insurance Commissioners has continued to work both within itself and with members of Congress to enact legislation designed to reduce the exposure to damages from a catastrophe and speed up the recovery afterward.

Mr. McCarty made his comments during a Sunday morning session of the “Form 500″ that opened the annual meeting of the American Council of Life Insurers.

“We're still working in the NAIC,” Mr. McCarty said, adding that the group expects to have its proposals ready “if not by the end of this year, then early next year.” Mr. McCarty heads the NAIC Property Casualty Committee.

Obviously, he said, there's not going to be any national legislation this year. However, he said that in the time since Hurricane Katrina, insurers, regulators and the federal government have been able to develop a clearer picture of exactly how much a natural catastrophe can cost.

A key to dealing with natural catastrophe risk, he noted, is pre-planning, through ensuring that states have solid infrastructures, land use plans and strict building codes, and that those codes are enforced.

That concept, he said, would ultimately reduce the costs of a natural catastrophe, adding that a $2 billion investment in New Orleans' levees and infrastructure could have saved billions in costs and a number of lives.

Currently, he said, it's up to state and local governments to ensure they are prepared for a disaster, but there's no mechanism to ensure that officials follow through with proposals that mitigate future damages.

Adding to the problem, he said, is that many states aren't facing up to their level of vulnerability, even though “49 of the 50 states have a moderate-to-severe exposure to a potential natural catastrophe.”

Ultimately, Mr. McCarty said the concern is that it will require a future disaster for policymakers to recognize the need for planning in advance of a natural catastrophe is far more efficient and effective.

Mr. McCarty also commented on proposals concerning catastrophe insurance that has surfaced in his state's election campaign for governor. Both candidates for governor in this November's elections have announced plans to reduce property insurance rates for homeowners.

The Republican candidate, Attorney General Charlie Crist, has called for decreasing the threshold for insurers to purchase low-cost reinsurance from the state.

Currently, insurers must have losses of $5 billion before the state gets involved, but Mr. Crist would lower that threshold to $3 billion.

Mr. McCarty said this plan would allow the state to use a “powerful tool” in its catastrophe fund to deal with what could be considered by some standards as “price gouging in the global reinsurance market.”

Mr. Crist's proposal would impose some burdens on insurers as well, however, eliminating the practice of companies establishing Florida-only subsidiaries and requiring insurers who sell only some lines of coverage–such as auto–to also offer property coverage.

U.S. Rep. Jim Davis, D-Tampa, the Democratic candidate, has called for the establishment of what he calls the Hurricane Premium Prevention Fund, which would cover 70-to-90 percent of windstorm losses up to $20 billion in a single year.

The plan would be funded through a surcharge on premiums and Mr. Davis would require insurers to roll back their rates to reflect the savings from the decreased reinsurance costs and for them to sign under oath that increased rates are actuarially justified.

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