Disaster Bill Gets New Life
Washington
Legislation designed to encourage insurers to write in disaster-prone areas through a federal reinsurance program has been introduced in the U.S. House of Representatives.
The bill, sponsored by Rep. Ginny Brown Waite, R-Fla., is similar to measures introduced in Congress for a number of years, but which failed to pass because of concerns raised by the U.S. Treasury Department and conservatives.
Under the bill, Treasury would establish regional auctions in which both private insurers and reinsurers could buy reinsurance from the government at actuarial rates, with the book of exposures then resold in the open market. This would counter a trend where many carriers are unable to obtain affordable reinsurance, according to the National Association of Mutual Insurers.
H.R. 846, the Homeowners' Insurance Availability Act of 2005, "would benefit both large and small carriers, as large carriers might choose to buy the contracts directly from the program, while smaller companies might choose to buy this coverage from reinsurers who would be permitted to divide and transfer their contracts to many carriers," said Justin Roth, senior director of federal affairs at NAMIC in Washington.
"NAMIC believes this program will lead to more companies entering the disaster markets and will eventually create market stability," he said.
The system works by having the government sell the contracts it has purchased and use the funds generated in the sale in the event of a future disaster. "This is an approach that will have very limited federal involvement and will encourage more private involvement," Mr. Roth said.
At the very least, Mr. Roth said that introduction of the bill "insures that debate on the problem of insurance availability in disaster-prone areas will continue."
Reproduced from National Underwriter Edition, February 25, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.