McCarty Again Urges U.S. Catastrophe Plan

A national meeting in Alabama on the affordability and availability of property insurance heard the Florida insurance commissioner continue his campaign for a national catastrophe plan yesterday.

"The United States remains one of the few industrialized countries without a national catastrophe plan," said Commissioner Kevin McCarty, speaking at the National Association of Insurance Commissioners' (NAIC) Southeast Zone meeting in Mobile, Ala., which included insurance executives and congressional leaders.

Mr. McCarty first became involved with a drive for a national cat plan in November 2005 at a catastrophe insurance summit sponsored by then California Insurance Commissioner John Garamendi.

Besides Mr. Garamendi and Mr. McCarty, then New York Insurance Superintendent Howard Mills and Illinois Insurance Director Michael McRaith joined to call for a private, state-federal partnership to fund mega-catastrophe losses, as well as creation of a new all-perils homeowners policy that would cover the cost of flood losses.

Mr. Garamendi is now his state's lieutenant governor, while Mr. Mills left office with the change in New York's governorship to Eliot Spitzer.

Although the focus of the meeting was on the property insurance marketplace, Mr. McCarty in his opening remarks touched on a range of catastrophe issues, including the National Flood Insurance Program and the California Earthquake Authority.

He said the interest expressed at the meeting by regulators from other states showed that "hurricanes and other catastrophic events are not a Florida problem--they are a national problem that requires a national solution."

As the NAIC Southeast Zone Chairman, Mr. McCarty co-hosted the event with NAIC's president--Alabama Insurance Commissioner Walter Bell.

Commissioners from Arkansas, Louisiana, Mississippi and South Carolina also were in attendance.

U.S. Rep. Jo Bonner, R-Ala., U.S. Rep Tim Mahoney, R-Fla., and insurance executives also offered testimony during the four-hour public meeting.

In other comments concerning the insurance marketplace, Mr. McCarty said that "those of us exposed to wind and hurricane are stuck in the middle. The product is offered almost entirely in the private market. Unfortunately, the consumer does not have the choice they would have in a competitive market--the choice to walk away."

He said "the result is that the critical price discovery role of competitive markets is not allowed to work. Conversations that suggest letting the market set the price seem to overlook this point--the insurers' price is an asking or offering price, but since the consumer does not have the ability to counteroffer or not buy, there is no bid price."

He added that "markets cannot clear in an efficient manner. The result is the availability and price volatility problems that plague us today."