An insurance trade group executive told a college audience today that catastrophe funds and legal changes are needed to improve the nation's property protection system.
That insurance framework, said American Insurance Association President Marc Racicot, is critical to building healthy coastal insurance markets and preventing communities from catastrophic loss.
His remarks at Mississippi State University, Starkville, Miss., were reported in an AIA statement.
"In August it will have been two years since [Hurricane] Katrina. We are now one month away from the start of another hurricane season on June 1, and there is no time like the present to apply lessons learned from Katrina in a forward-looking, positive way–to better secure our nation against future disasters," said Mr. Racicot.
To that end, he said, AIA has developed a holistic national hurricane reform agenda. "The goal is to keep our integrated, multifaceted, risk-bearing financial mechanisms working for the benefit of all Americans," advised Mr. Racicot.
He said his organization's natural catastrophe agenda includes proposals designed to have immediate, positive effects on the market, as well as proposals with longer-term benefits.
The agenda includes protective measures, such as mitigation and land use planning; regulatory and legal reforms to improve the stability of insurers' operating environment; tax incentives that encourage individual responsibility for hurricane preparation; and National Flood Insurance Program reforms.
Speaking during his third visit to Mississippi since Hurricane Katrina, Mr. Racicot praised the leadership of Mississippi Gov. Haley Barbour and Insurance Commissioner George Dale in the state's recovery and rebuilding process, and their efforts to revitalize the state's property insurance market.
Key among those achievements is restructuring of the state's wind pool, which ran a $545 million deficit in the wake of Katrina, paid by private insurers. Enacted this year, the new law allows these deficits to be recouped through a statewide surcharge and gives the wind pool the authority to issue bonds to provide further claims-paying capacity.
Turning to bills that have been introduced in Congress to address different aspects of the natural catastrophe issue, Mr. Racicot said his group opposes a federal reinsurance mechanism aimed at encouraging states to establish catastrophe funds for homeowners insurance, based on the premise that large-scale natural catastrophes are uninsurable by the private sector.
"New government programs may build short-term bridges to get from one day to the next, but certainly are no silver bullet. Even after Katrina, private sector capacity for natural disasters has grown," said Mr. Racicot.
He said it was ironic that the single greatest threat to the private sector risk transfer mechanism is not the force of hurricane winds, but legislation and regulation that displace private capital or make it economically unfeasible for private companies to operate in coastal markets."
"As is always the case, our entrepreneurial, democratic society functions best when public and private interests cooperate, working together for the common good. Property-casualty insurers are willing and able to play our key role in leading the dialogue about how best to secure the nation's families, communities and property," Mr. Racicot concluded.
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