Senate Panel OKs Bill To Create Cat Issues Commission

WASHINGTON--Legislation creating a commission to determine whether the private insurance market has the resources to deal with catastrophic natural disasters breezed through the Senate Banking Committee today.

The legislation, "The Commission on Natural Catastrophe Risk Management and Insurance Act of 2007," creates a 16-member panel, to be appointed by the congressional leadership, to study various aspects of natural disasters and insurance.

This will include preparing a report that must be given to Congress by Dec. 1, 2008. Among its determinations, the panel must tell Congress whether some cat exposures may be beyond the capability of the private market and individual state cat funds to deal with.

The legislation was reported out by the Senate Banking panel by voice vote. The concept was originally introduced in different legislation sponsored last year and this year by Florida Sen. Bill Nelson, D. He was joined this year by Florida's other senator, Mel Martinez, R.

But the bill was completely rewritten by the staff of the Banking panel at the request of Sen. Chris Dodd, D-Conn., its chairman, to address concerns that it might have an anti-insurance industry bias.

The rewritten measure had broad insurance industry support, such as a lobbyist for the National Association of Mutual Insurance Companies (NAMIC), who worked closely with Committee staff to ensure a more neutral approach as to the membership and charge of the Commission created by the legislation.

"Many of the problems faced by residents of the Gulf regions after the 2005 hurricane season might have been prevented if strategies had been in place beforehand," said Justin Roth, NAMIC's senior federal affairs director. "It is our sincere hope that Congress will adopt this legislation and allow a panel of experts to develop practical solutions to the issues confronting homeowners in areas vulnerable to natural disasters."

NAMIC praised Sen. Dodd for including in the legislation two key issues for the commission to examine: the impact of stronger building codes and the effect rate regulation has on cat insurance.

"NAMIC has continued to fight for stronger statewide building codes as a way to decrease losses for homeowners," Mr. Roth said.

The Property Casualty Insurers Association of America was also supportive, saying it hopes the Commission will come back with recommendations backing one of its policy goals.

"PCI believes that there is a need to encourage new capital to enter property insurance markets and facilitate innovative ways to cover difficult risks through enacting greater regulatory flexibility and lower regulatory costs," said June Holmes, PCI's interim chief executive officer.

She added, "PCI believes that developing and enacting effective public policy to address future natural catastrophes is one of the most significant issues facing the insurance industry."

Marc Racicot, president of the American Insurance Association, said: "We remain hopeful the commission will ultimately find, for a number of reasons, that the private market is best suited financially to manage natural catastrophe risk."

Furthermore, he said, "we anticipate the commission will recognize that in order for the private market to manage this risk at peak efficiency and effectiveness, insurers must have the tools to measure and reduce catastrophe risk, and the insurance regulatory system must allow rates to reflect the real costs of the risk."