Sen. Schumer Boosts Catastrophe Commission

WASHINGTON--U.S. Sen. Charles Schumer, D-NY, said he is pushing congressional legislation he hopes will improve the homeowners insurance market for residents of Long Island and other coastal areas of his state.

Mr. Schumer, a powerful member of his party, said he is backing a measure passed recently by the Senate Banking Committee to create a commission to determine whether the private insurance market has the resources to deal with catastrophic natural disasters.

In a statement, he said he wants Congress to act promptly on the legislation "with the goal of increasing availability and affordability of insurance in communities like Long Island," because "they are being targeted by insurance companies for reductions of coverage."

Earlier this month, Sen. Hillary Rodham Clinton, D-NY, called on Allstate, one of the largest insurers of Long Island homes, to reconsider its decision to cut back on coverage it provides on Long Island. She also asked Allstate Chief Executive Thomas Wilson for a detailed explanation on the decision to limit its business there.

Sen. Schumer said his hope was that the commission approach would help deal with the "growing crisis" of insurers "abandoning communities with perceived risk, or saddling homeowners with cripplingly high premiums."

Sen. Schumer is a member of the Senate Democratic leadership. Amongst his other positions, he is a member of both the Senate Banking and Judiciary Committees.

"By addressing the current state of catastrophe insurance, the commission can find a comprehensive fix so that homeowners will have the security to know their homes are safe, and insurers won't have the guise of catastrophes to hide behind when attempting to charge outlandish premiums," he said.

The bill was reported out by the Senate Banking Committee Aug. 1 by voice vote after 30 seconds of debate and without a hearing. Among its determinations, the panel must tell Congress whether some cat exposures may be beyond the capacity of the private market and individual state catastrophe funds.

The bill's support within the insurance industry is mixed. In a recent interview with National Underwriter, Leigh Ann Pusey, chief operation officer and senior vice president, government affairs, of the American Insurance Association, voiced measured support for the legislation.

She said the AIA supported the bill, introduced by Sen. Chris Dodd, D-Conn., chairman of the committee, as an alternative to different legislation introduced earlier this year by Democratic Sen. Bill Nelson and Republican Sen. Mel Martinez, both of Florida.

The Nelson/Martinez measure could not be supported, Ms. Pusey said, because it was configured in such a way as to "appear pre-determined" to recommend that government involvement was needed to deal with the problems created by the growing number of catastrophic storms in coastal areas.

She said she hopes Congress gives the legislation "consideration."

But Allstate voiced concerns about the bill because the 16-member commission created by the legislation wouldn't have to report its findings until Dec. 31, 2008.

"We are hoping that something is decided and can move ahead more quickly," said Krista Conte, an Allstate spokesperson.

She noted that Allstate has been "discussing a public policy solution for some time now." Ms. Conte is alluding to Allstate support for legislation that would create a federal/state program to backstop insurance companies when payouts exceed a specific threshold.

Allstate, amongst other advocates of such legislation, said it will enable companies to "make more insurance available to consumers, and at a lower cost."

But AIA and other insurance groups said the private market, including reinsurance, can best handle the problem.

Marc Racicot, AIA president, said in a statement when the legislation passed the committee, "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."