While this is the beginning of a new year, old problems still remain—some of which show no sign of being resolved anytime soon, including in the insurance industry.

Long-tail risks are a perfect example of how the past has a way of creeping up when you least expect it. There are two long-tail risks insurers should pay attention to in 2012 for the benefit of the industry and the global village.

First is climate change. An article a couple of weeks ago in The New York Times titled, “Harsh Political Reality Slows Climate Studies Despite Extreme Year,” examined how political pressure is killing the financing needed to study climate change—and give direction to determine what could help deal with the impending future.

This past year was one of extreme weather events in the United States, say meteorologists and insurers. Events ranged from severe thunderstorms and tornadoes to drought stricken areas of the United States. Individually, experts say, these events are not unusual, but the fact that so many took place at the same time raises red flags.

To get down to understanding why this is happening takes money and manpower. The tools are there, but money isn't. It's being held up by members of Congress who view finding rational answers to the complex issue as a propaganda campaign by the Obama administration, says the Times.

This shortsighted policy among global warming naysayers is having a detrimental effect on our society.

Starved of resources, the scientific community cannot answer fundamental questions that would ultimately help farmers grow crops; assist planners in locating projects in less risky places; help engineers design buildings to meet climatic threats and insurers to adequately underwrite risk.

In 2012, the insurance industry community should make a bold statement beyond the efforts of a few major reinsurers—such as Lloyd's, Swiss Re and Munich Re to name a few. The industry needs to underwrite the efforts of science to come up with answers to these issues.

Silence doesn't cut it. A loud, unified voice is needed from the business community with a real stake in the effects of a changing climate.

One suggestion is that the industry use its political clout and nudge legislators to lift their opposition to funding research, not just for the good of the nation, but also for the good of the business sector.

Then there is the perennial dogfight over regulation. In particular, what exactly should be the job be of the Federal Insurance Office.

Industry lobbyists have fought tooth and nail to limit the power of the office. No one in the industry has an interest in living with a strong federal regulator of insurance. Some, in fact, would prefer gutting any action by the federal government that has anything to do with insurance.

There is validity to the argument that a one-size-fits-all approach to insurance regulation would be a nauseating burden on the industry. I can't imagine the feds regulating auto or homeowners insurance, nor do I think they want that headache.

However, insurers want efficiency in reporting, licensing and interstate regulation. For all the good work and efforts of the National Association of Insurance Commissioners, the reality is that a single commissioner cannot institute all the reforms the majority of commissioners agree to without his or her home state legislative body agreeing to it. Then there are the parochial interests of individual regulators and states that trump the common interest.

The lack of a cohesive regulatory element, with teeth, to enforce decision making is the single stumbling block to interstate efficiency.

Want an example? I'll give you two—NARAB (National Association of Registered Agents and Brokers) which still has not been universally implemented to allow agent's licenses recognized in every state.

The other is the Nonadmitted and Reinsurance Reform Act aimed at making doing business a whole lot easier for the surplus lines industry. Payment of taxes and regulatory issues would be handled by the wholesaler's home state.

This is a simple idea, but the only problem is states have different interpretations about what they are supposed to be doing under the law. Some collect, but don't share the tax. Others believe they are to collect the tax, but still have domain over regulating all wholesalers in their states.

In other instances, instead of one system for collection and distribution of tax, states are banding together under different affiliations and systems of collection and distribute of taxes.

Then you have the wholesalers who say their interpretation of the law is that they are only beholden to the regulator of their home state.

At least a federal referee (let's use that term instead of regulator) would be able to iron out the differences and lay out rules for everyone.

It is said that madness is doing the same thing over and over and expecting a different result. Let 2012 be the year of a different approach—and different results.

Special Reports /

End the Madness; Welcome Change in the New Year

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