New York Insurance Superintendent Eric Dinallo has come out with a bold proposal to alleviate the boom-and-bust cycle insurers and consumers must endure on catastrophe-related coverage, suggesting a regulation requiring property writers to put aside part of their premiums for a special reserve fund to help pay natural disaster claims. But even bolder is his call for carriers to go along with his plan regardless of the immediate tax implications.
Convincing Uncle Sam to alter tax treatment of cat reserves will be a very hard sell, given the red ink the federal government is already spilling every year. But Mr. Dinallo said the state's deteriorating coastal property insurance market cannot wait for Congress to do the right thing, urging insurers to remember that action speaks louder than words.
Im in favor of tax-deferred reserves for hurricanes, but the industry will only achieve that change if it acts first and gains credibility, he said. Meanwhile, we need to start building protection against the potentially huge costs of hurricanes now.
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