NAIC Unit Head Praises Dems' Cat Focus

SAN ANTONIO, TEXAS--The head of a national regulators' unit working on a catastrophe insurance plan voiced enthusiasm here for the new focus the incoming Democratic leadership in Congress has said it will give to the issue.

"It is a new day," said Florida Insurance Commissioner Kevin McCarty following a meeting of the Catastrophe Insurance Working Group of the National Association of Insurance Commissioners.

His comments at the NAIC winter meeting came after getting word that the Democratic leadership in the House has put creation of a federal commission on catastrophe insurance issues on the first 100 days agenda.

The commissioner, who chairs the Working Group, said the panelists had to complete the NAIC's plan by March in order for it to play an important role in the new federal commission's report now expected some time in the summer.

U.S. Rep. Debbie Wasserman Schulz, D-Fla., will head the commission that will work beside one in the Senate under the leadership of Bill Nelson, the former Florida insurance commissioner who won a second term in the Senate last November.

For more than a year Mr. McCarty has spearheaded creation of a new NAIC catastrophe plan, the most controversial elements of which deal with the creation of a federal backstop fund and an all-perils policy that would have insurers cover flood risk for the first time in decades.

The plan also calls for new incentives such as low interest loans and tax credits for mitigation measures that strengthen structures in catastrophe-prone areas.

Since most of the plan requires federal action, the NAIC has not specifically endorsed it but instead urged Congress to look seriously at the issues.

In the aftermath of Hurricane Katrina, many prominent members of Congress have questioned the industry's claims-paying practices that exclude floods. Disputes have arisen over whether so-called storm surge-related water damage should be classified as wind or flood.

In addition, it is estimated that about half of residents in flood-prone areas have not purchased National Flood Insurance Program coverage.

The incoming new chair of the main House subcommittee dealing with insurance, U.S. Rep. Paul Kanjorski, D-Penn., has spoken favorably of the all-perils policy, which could affect the commission's report.

Meanwhile, Mr. McCarty said that plans are underway for the creation of a multistate compact of Southeast wind-prone states that could serve as a model for any federal fund and a substitute for the state funds envisioned in the second layer of the new catastrophe fund.

The NAIC has set a President's Conference in Miami for Jan 17-18 to discuss catastrophe issues where such a proposal could be fleshed out.

In a related development, the National Conference of Insurance Legislators has decided against working with the NAIC on a joint catastrophe plan to be approved in March, and instead will offer comments on what the regulators come up with.

In a letter to Mr. McCarty, Mississippi State Sen. Dean Kirby, R-Pearl, who chairs the NCOIL Subcommittee on Natural Disaster Insurance Legislation, said the group maintains strong reservations about a required mandatory offer of an all-perils insurance policy for which the National Flood Insurance Program would serve as a reinsurer.

NCOIL Executive Director Susan Nolan said the logistics of working out a jointly sponsored document remained too daunting within the short period of time now envisioned.