WASHINGTON–The public sector can speed ongoing recovery from Hurricanes Katrina and Rita by building the Gulf Coast consumers' and businesses' confidence by working to ensure the area is better prepared for the next major storm, according to a new study.
That recommendation was contained in a report unveiled today by the Financial Services Roundtable, which also discussed the role of court rulings to ensure confidence on the part of insurers.
Dr. James Richardson, an alumni professor of economics at Louisiana State University, said typical recovery time from a hurricane is about 12 months, while the Gulf Coast region has still not fully recovered now, nearly 14 months after Hurricane Katrina.
While the public sector–through Congress, the Federal Emergency Management Agency and local authorities–has been working to rebuild New Orleans and other communities, the public sector alone "cannot guarantee a recovery," Mr. Richardson noted.
A full recovery, he said, depends on the people of those communities regaining a confidence that they will be safe and secure with a working infrastructure and that they will not be facing the same problems during the next hurricane.
With that in mind, Mr. Richardson said the study sought to answer the question, "How can public policy eliminate or reduce these uncertainties?"
Robert Hartwig, a senior vice president and chief economist for the Insurance Information Institute, said that for insurers one of the main issues involves the court system.
While nearly 80 percent of those in the New Orleans area had flood insurance coverage, he noted that fewer than 20 percent of homeowners in the three coastal counties of Mississippi were covered for flood damage, and that "consequently you're seeing an outbreak of litigation in Mississippi."
The outcome of those cases will be a major factor in building insurers' confidence in the region, because those cases hinge on whether an insurance contract that excludes flood damage would be fully recognized and supported by the courts.
"We need to have confidence that the legal system will uphold our contracts," he said. If the courts act to force insurers to cover what they believe is flood damage, he added, "then I would say that the confidence of the insurance industry, and of other businesses, will be totally gone."
The report, crafted by the Financial Services Roundtables' Blue Ribbon Commission on Mega-Catastrophes, makes more than 20 recommendations to help hasten recovery.
It includes proposals to better map the flood zones in and around New Orleans, provide training for more skilled workers, and undertake a multiyear fiscal analysis as a condition for gaining access to federal assistance for operating funds.
"Mega-catastrophes pose unique challenges, and the only way to meet those challenges is for business and government to work together to mitigate the effects of such disasters as much as possible," said Steve Bartlett, president and CEO of The Financial Services Roundtable.
The Roundtable said it will release another study taking a broader view of mega-catastrophes next April.
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