With politicians in coastal states facing “white hot” pressure from rising property insurance rates, some federal catastrophe funding comes closer to reality, said one investment bank analyst late last week.

Morgan Stanley property-casualty analyst William Wilt said that a conference call with a leading Florida lawmaker on insurance matters has convinced him that 2008 presidential hopefuls will face increasing pressure to support such a program.

Florida State Senator Steve Geller, D-Hallandale Beach, told the analysts of his recent resolution urging lawmakers to withhold support for any presidential candidate failing to support a federal natural disaster plan.

A Florida congresswoman has introduced legislation creating a federal catastrophe fund backed by state funds to shore up the private insurance industry in the event of another catastrophe on the scale of Hurricane Katrina.

Mr. Wilt noted that the number of electoral votes from the Northeast and Southeast coastal states adds up to 242, just 28 short of victory. “This issue is not going away and will, rightly in our view, weigh on the valuation of reinsurers for some time to come,” he wrote.

“Although it still stings to think about this issue in the context of public policy and the potential for a redistribution of wealth following a mega-catastrophe, we cannot disagree with the senator's position,” he wrote.

With Florida in the lead, other states are bound to follow. “At what point will enough states be relying that the hand of the federal government will be forced and a national disaster plan will become necessary,” Mr. Wilt wrote.

As to why reinsurers became the so-called “villains” of the emergency legislative session when compared to the primary companies, Mr. Wilt noted the senator's observations that many lawmakers are insurance agents themselves and that their lobby was too well represented for them to take too much of a hit politically.

“To paraphrase the senator, they 'punted' on the issue and sent it over the board of directors at Citizens (residual market property insurer) for their deliberation,” Mr. Wilt wrote of Mr. Geller, who is also a past president of the National Conference of Insurance Legislators.

This article originally appeared in The National Underwriter P&C. For the complete article, please click here.

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