Producer Groups, Carriers Push National Coverage Plan For Windstorms

Noting that more than half of all Americans live within 50 miles of the nation's coasts, and that the collective value of coastal properties from Texas to Maine is nearly $7 trillion, the group argued that preserving the status quo–with a vast number of those living on or near the Gulf and Atlantic coasts not having access to affordable property insurance–is unacceptable.

The groups laid out a "Four Pillars" approach to windstorm coverage for named events, which would:

o Implement a uniform set of rules for insurers that would apply to coastal zones from Texas to Maine in the event of a named windstorm, allowing insurers to spread the cost of risk among as many people as possible who are subject to the same exposure.

o Require risk-based and actuarially sound rates using approved standards and certified windstorm risk models, effectively making the rate-setting process transparent.

o Establish a cost-based federal reinsurance program for insurers for extreme events, including multiple losses from one or more major events in a single season. The reinsurance would be available at cost, without federal subsidy, and carry a requirement that insurers would pass any savings directly on to their customers.

o Implement a detailed mitigation program to encourage strong building codes; incentives for state and local adoption as well as enforcement of those codes; enhanced construction technology; and land-use planning requirements.

"Hurricanes don't respect state borders, and putting in place a set of uniform rules for insurers that would apply to the entire coastal zone from Texas to Maine just makes common sense," CIAB President Ken A. Crerar said in a statement.

"Under this proposal," he said, "those subject to the same risk can share in the cost of their protection, but those who do not face the same risk will not–and should not–be charged."

Travelers Chairman and Chief Executive Officer Jay Fishman said the insurer is committed "to finding a private market solution to the nation's coastal insurance challenges."

"The comprehensive concept we are offering today reflects input and ideas from across the industry, and is based on four pillars that, taken together, focus on facilitating the availability and affordability of private insurance for hurricane and tropical storm wind coverage along the Gulf and Atlantic coasts," said Mr. Fishman.

Nationwide CEO Jerry Jurgensen said "property owners who live in hurricane-prone areas deserve the same peace-of-mind and availability of insurance coverage as everyone else."

Nationwide, he added, "supports the four pillars being unveiled today as a consistent, reasonable approach to managing coastal risk. These principles, if implemented, provide a sound framework that would encourage private insurance companies to broaden availability of property wind insurance coverage for consumers who live near the water."

An IIABA representative said in an e-mail that the group supports the principles outlined in the four pillars, but no specific proposals to implement them.

Meanwhile, a National Conference of Insurance Legislators subcommittee voted down an amended resolution that would have supported the establishment of state catastrophe funds, "which may be eligible to receive federal funds under specified conditions."

It stipulated that if a natural disaster caused losses exceeding an unspecified "designated threshold," the federal government would provide the appropriate state fund with money to cover insured losses above that limit.

"The federal options should include a catastrophe reinsurance backstop and a federal loan program," the resolution stated.

For both the loan program and the backstop, the resolution contained language that the states would, over time, reimburse the federal government.

The resolution also said NCOIL "believes such a state-federal system would result in dramatically lower property-casualty insurance rates, and would substantially strengthen the solvency of the private sector insurance industry, to the benefit of citizens nationwide."

The amended resolution was proposed by Florida State Sen. Steven Geller, D-Hallandale Beach, co-chair of NCOIL's Subcommittee on Natural Disasters.

To counter a belief among some of the resolution's critics that any national catastrophe plan would be a subsidy for Florida specifically, Sen. Geller played an edited video from a Weather Channel series that outlined major catastrophes that could occur at any time all around the country.

Among them were wildfires in parts of Texas and California; hurricanes in New York, Savannah, Ga., and Houston; earthquakes in Las Vegas, Seattle and the Mississippi River Valley; a volcanic eruption in Washington State; and serious tornadoes affecting cities such as Dallas and St. Louis.

After the vote–taken in New York during NCOIL's recent quarterly meeting–Sen. Geller expressed doubt that any national catastrophe resolution would pass through the subcommittee, noting he has been a key proponent of the measure, but that this was his last NCOIL meeting.

He said he had some clout as a state senate minority leader and a past president of NCOIL, and added that he doubted a similar resolution would get passed in the future based on the results of his efforts.