Consensus Needed On Competing Cat Plans

For those of you who don't believe you can ever have too much of a good thing, consider the fact that The Hartford just came out with a plan of its own to alleviate the fallout from another catastrophic windstorm for homeowners and insurers, as well as the federal and state governments. While Hartford's plan is intriguing, thoughtful, comprehensive and well-meaning, it is but one of many put forth by industry figures. How is the industry, the states and Uncle Sam supposed to come to a consensus amid such a cacophony?

(To read NU's full coverage about The Hartford's scheme, click here.)

As reported by our own Dan Hays (who also gave me the idea for this blog entry), The Hartford's plan would include a federal backstop for insurers, but with a new twist–the creation of an IRA-like vehicle to allow homeowners to save for disaster expenses.

The company says its Coastal Catastrophe Partnership plan is designed to deal with the looming economic crisis posed by a major hurricane. CEO Ramani Ayer–an eloquent, impassioned speaker and lobbyist when it came to renewing TRIA last year–said he has begun conversations with members of Congress about his companys multi-faceted initiative.

He also said he is talking with the leaders of ProtectingAmerica.org–backed by Allstate–which has advanced its own catastrophe plan that calls for state disaster funds, backed up by the federal government.

That's the rub. I'm not going to go into the specific elements of each plan in this space, but I can't help believing Congress will get a headache and tune out all the various proposals with so many different plans being put forth by insurance industry bigs.

Why, just last month, the IIABA and CIAB, along with Travelers and Nationwide, joined together to promote their own plan to spread coastal windstorm risks across state borders. (Click here to read more about that effort.)

The problem is that everyone has their own plan to pitch. Why can't they just convene a cat summit and agree on one proposal? Maybe then they would have a chance of getting some serious attention in Congress and the state legislatures.

Another big problem is that not everyone in the industry believes there should be any “public-private” partnership on disaster coverage–that the private market should be left alone to do its thing. So achieving an industry consensus could be impossible, since a significant part of the business wants the status quo left intact.

But at least if those who do feel a public-private partnership is necessary would get together and speak with one voice, that would clear up a lot of the static that's now making it impossible to focus on any one “solution.”

It's bad enough the industry is so widely split on a fundamental issue like state versus federal regulation. A similar split on catastrophe management will probably doom all of the plans proposed thus far–no matter what their merits.

What do you folks think?