NAIC Drafts Cat Risk Model

The National Association of Insurance Commissioners is considering a draft of a national catastrophic risk insurance program as one means of reforming the way that the nation finances the economic losses from natural disasters. The NAIC is suggesting initiatives that would enhance the ability of markets to respond, as well as provide incentives for states and communities to improve land-use planning, building codes, and other loss prevention and mitigation activities. Other provisions would allow insurers to establish tax-deferred catastrophe reserves and to use catastrophe bonds to develop additional capital for such risks. The proposal also calls for government-mandated coverages, rates, or discounts.

Although the Property Casualty Insurers Association of America applauded regulators for addressing the issue, the group recommended proceeding cautiously. “We have had very little time to evaluate this latest proposal and would encourage further discussion with the industry, state, and federal legislators prior to advocating a specific plan,” said Ernie Csiszar, president and CEO of PCI. “However, we do believe that now is the appropriate time for a thorough debate on how we, as a nation, deal with the catastrophic risks that face individuals and business in all parts of the country.”