Stakeholders and federal lawmakers must realize that without a solution for terrorism or natural catastrophes, the nation faces economic havoc and action is needed this year, according to a new study.
Karen Pauli, TowerGroup senior analyst for insurance, made that finding in a report for the Needham, Mass.-based consultant firm, 2007 U.S. Insurance Regulatory Agenda: D?j? vu All Over Again.
"All involved parties must keep a focused eye on the potential for severe economic dislocation in the United States if meaningful solutions to catastrophic loss from either a natural or terrorist event are not in place when an incident occurs," she wrote.
According to the Tower analysis, Congress' decisions this year concerning insurance regulation and catastrophe and terrorism backstops could have a dramatic and long-lasting impact on the industry.
The study by TowerGroup said the issues of natural catastrophe risk, the optional federal charter and the extension of the Terrorism Risk Insurance Act are all likely be debated this year in Congress.
"The pressing issues of a national catastrophe fund, expiration of the Terrorist Risk Insurance Act and an optional federal charter could keep all interested parties entirely absorbed," wrote Ms. Pauli.
On two of these issues–TRIA and the catastrophe risk–insurers must work to keep up their technological preparedness in areas such as predictive analytics or risk facing a competitive disadvantage, Tower found.
While the insurance industry was able to fulfill its obligations in the wake of the Sept. 11, 2001 terrorist attacks and Hurricane Katrina, Ms. Pauli noted that insurers must not become complacent after a relatively calm 2006 hurricane season.
She noted the potential for far more severe economic losses should the next attack or storm hit a high value area. As a result, Ms. Pauli wrote that legislative solutions, as well as carrier preparedness, should be a priority.
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