The Hartford Launches National Cat Plan Effort

The Hartford and its chief executive officer, Ramani Ayer, said today the carrier will attempt to promote a public-private plan to deal with natural catastrophes that would include a federal backstop for insurers.

The company is calling its “national outreach effort” the Coastal Catastrophe Partnership plan, and said it is designed to deal with the “looming economic crisis posed by a major hurricane.”

Mr. Ayer said he has begun conversations with members of Congress about his multi-faceted plan, and is also having discussions with the ProtectingAmerica.org. group, backed by Allstate–which also has advanced a national catastrophe plan, but differs from The Hartford's somewhat.

He said he views his plan as a middle ground for government involvement, between the “socialistic” efforts of some in Congress, and reinsurers who believe all catastrophe protection should be left to the private market.

Further along, Mr. Ayer said he hoped to see about getting specific lawmakers to develop a bill around his plan.

Among its other elements, it proposes:

o Creation of IRA-like savings vehicles–”supplemental catastrophic security accounts”–for working families and retirees.

oRequire coastal homeowners to buy flood insurance, possibly by inserting flood coverage as part of the standard HO policy.

o Ensure that coastal homeowners pay the actual cost of the risks, providing them with an incentive to strengthen their homes.

o Create a federal backstop for insurers when hurricanes cause a 1-in-100-year loss.

o Have states encourage the private market by creating their own reinsurance funds, pass on federal backstops and state reinsurance fund costs to policyholders, and limit state reinsurance activity to times when the private market seriously diminishes.

Mr. Ayer said that another catastrophe along the lines of Hurricane Katrina would be an extreme challenge to state and local economies.