Plumeri Calls For All-Cat Backstop

The chief executive officer of London-based Willis brokerage called yesterday for development of a national plan to support insurers and protect the nation's economy from a worst-case natural or man-made disaster.

Joe Plumeri, chairman and CEO of Willis Group Holdings, urged that action in a talk yesterday at the Real Estate Roundtable in Washington.

He said that while the industry was able to deal with last year's catastrophes, there is not enough capacity available in, what he dubbed, “This New Era of Risk.”

“While in modeling disasters only happen one at a time, in real life we have to be prepared for multiple concurrent events, which could wreak havoc not only on the insurance industry but on the entire American economy,” he said.

Mr. Plumeri opined that it was critical that a single national disaster insurance program be established in an era where natural disasters cause enormous damage to high concentrations of property built in catastrophe-prone areas and the threat of terrorism is unabated.

He did not outline what that plan should look like, but said whether it resembles Europe's Pool Re terrorism plan, or some other program, a national program is essential.

“Natural and, regrettably, man-made disasters are permanent problems to which we need a permanent solution to protect the long-term economic security of America,” he said in prepared remarks.

To help facilitate such a program, he said it was essential to win passage of an Optional Federal Charter program. He said such a program would create a federal voice to advocate for the insurance industry and lift the “burdensome administrative hurdle for us” of the state-by-state regulatory system.

He called on lenders and real estate institutions to join in calling for such a catastrophe plan. Mr. Plumeri noted that without a federal backstop plan for terrorism, which is set to expire in 2007, insurance may not be readily available for mortgage securities required by rating institutions and bankers.

“If the global insurance industry is going to continue to provide protection for the U.S. economy, a new era of risk demands new approaches,” Mr. Plumeri concluded.

“It may not be possible to stop Mother Nature from unleashing her wrath, and the risks associated with terrorist attacks are here to stay, but by working together, the insurance industry and lawmakers have the power to minimize post-disaster disruptions,” he said.