National Cat Program Could Happen: Lobbyist

NEW ORLEANS--Spurred by the 2005 record hurricane year, Congress may finally be in the mood to create a national catastrophe insurance program, but not this year, a Washington lobbyist told claims professionals meeting here.

"There will be no solution in this Congress, but we may be ready to move forward [with federal legislation]" said Julie Gackenbach, a member of the GH Group, which represents insurance interests.

Speaking at the ACE claims conference sponsored by the National Underwriter Company, Ms. Gackenbach briefed the group on the history of congressional catastrophe proposals, which go back to the 1970s, the current measures Congress is considering, and the catastrophe plan state regulators are developing.

Ms. Gackenbach said there are a variety of bills dealing with natural catastrophes now pending in Congress, and predicted "as we go into the hurricane season they will get a lot more attention."

She told her audience the bills will be the subject of a lot of hearings by congressional committees, but not to expect any of them to secure passage in this session.

One bill introduced by Sen. Bill Nelson, D-Fla., would create a commission to study catastrophe disaster risk and insurance with a mandate to provide a report within 90 days. The legislation, she said, is aimed at providing a mechanism to start debate over a catastrophe program.

Assessing the activity of the Allstate-backed Coalition Protecting America.Org, which is campaigning for a federal-state-private insurer catastrophe program, Ms. Gackenbach said the effort is securing a lot of support.

"It is getting a lot of attention. It is moving," she said.

Ms. Gackenbach also outlined the complicated, multilayered catastrophe program proposal being developed by the National Association of Insurance Commissioners, which she said could possibly win final approval at the group's fall meeting.

The NAIC plan for a state-federal and private insurer catastrophe program would include development by insurers of an all-perils policy that would include flood and earthquake, she said.

She noted that insurers are worried about language calling for premium credits for policyholders who take mitigation steps, fearful that this requirement could be mandated and so become "a de facto rate decrease."

The most difficult part of the NAIC plan, she pointed out, is a proposal calling for deferral of federal taxes on reserves that insurers put aside for catastrophe. She said the difficulty arises because any change in federal tax law that reduces revenue must be balanced by an offset somewhere else.

Ms. Gackenbach was formerly a lobbyist for the Property Casualty Insurers Association of America.