NAIC Catastrophe Plan Held Up

ORLANDO, FLA.–A plan by the states for dealing with catastrophe risk nationwide, which was looked on unfavorably by insurance trade groups, was put on hold here yesterday by regulators who felt it needed updating and more comment.

The action came at the National Association of Insurance Commissioners meeting, where the Catastrophe Insurance Working Group unveiled a white paper on “Natural Catastrophe Risk: Creating a Comprehensive National Plan.”

When Florida Insurance Commissioner Kevin McCarty, who heads the working group, asked if they should adopt it, regulators said they would like to defer it to another meeting for more comment and noted that it needed significant updating.

Among other things, its pages contained a discussion of legislation in Congress that referenced legislation introduced by Rep. Mark Foley, R-Fla. who resigned in 2006.

Louisiana Insurance Commissioner James Donelon said if there was going to be a delay, then he would like a meeting that would last for two hours.

When Mr. McCarty said he did not think there would be room to slot an extended session into one of the NAIC's full-scale onsite public meetings that involve sessions for all its organizational groups, it was suggested that a special “offsite” meeting be held.

Mr. McCarty said if it could be arranged, an offsite session would probably be held in Kansas City, the NAIC headquarters, or Atlanta. The commissioner commented, “We want to be relevant” and we want to get it right.

Since the white paper was developed, there has been a variety of new legislation in Congress on the issue of providing a national system to back up insurers in the event of a major catastrophe.

The white paper at issue states that the insurance industry cannot be expected to provide broad coverage for catastrophes “without adequate financial backstops for the most extreme events.”

Robert Detlefsen, National Association of Mutual Insurance Companies vice president for public policy, said the whole point of the program appeared to be to have risks from catastrophe-prone states spread onto those less likely to have them.

The white paper proposes that insurers create an all-perils policy, and Mr. Detlefsen said he wondered why an Indiana resident would need a policy protecting against hurricane.