The Commission on Natural Catastrophe Risk Management and Insurance Act of 2007, which passed on a voice vote, would create a 16-member commission required to issue a report on its findings to the Senate Banking Committee and the House Financial Services Committee by Dec. 1, 2008.
Both the Property Casualty Insurers Association of America (PCI) and the The National Association of Mutual Insurance Companies (NAMIC) commend and support the bill to establish the commission. Following are partial statements from each organization:
“PCI believes that developing and enacting effective public policy to address future natural catastrophes is one of the most significant issues facing the insurance industry,” said June Holmes, PCI’s interim CEO. “Experts agree that the nation faces the prospect of more frequent and severe natural disasters in the coming decade. Moreover, significant property development, population growth, and rapidly rising real estate prices in areas prone to natural disasters exacerbates the potential for increasingly larger human and economic losses as a result of such disasters, requiring stronger mitigation as well as greater financial resources to fund future recovery and repair efforts.”
PCI believes that it may be necessary for the federal government to offer liquidity protection to state catastrophe funds at the highest level consistent with the maintenance of stable markets and avoidance of widespread insurer insolvencies. It is also essential that any federal program include measures intended to promote freedom for markets to respond to these exposures, including meaningful limitations on the ability of participating states to control and/or suppress property insurance rates or to maintain other unnecessary restrictions. PCI is pleased to see that the bill includes an evaluation of federal and state regulatory issues as well.
Furthermore, PCI believes that insurers should also have the ability to establish voluntary, tax-deferred pre-event catastrophe reserves for purposes of funding all or part of their exposure to catastrophe risks. Policymakers should consider ways in which further development of the private catastrophe bond market can be encouraged by removing regulatory or accounting impediments to the use of such vehicles and by other steps which may foster development in this market and the commission is charged with looking at these issues.
“The commission bill, as currently drafted, includes a thorough examination of these issues that are very important to consumers, PCI and our property and casualty insurer members, and the nation, and we support legislation that will fairly evaluate these issues,” Holmes said.
NAMIC Concurs, Commends Legislation
“Many of the problems faced by residents of the Gulf regions after the 2005 hurricane season might have been prevented if strategies had been in place beforehand,” said Justin Roth, NAMIC’s senior federal affairs director. “It is our sincere hope that Congress will adopt this legislation and allow a panel of experts to develop practical solutions to the issues confronting homeowners in areas vulnerable to natural disasters.”
NAMIC praised committee Chairman Christopher Dodd of Connecticut for including in the legislation two key issues for the commission to examine: the impact of stronger building codes and the effect that rate regulation has on catastrophe insurance. “NAMIC has continued to fight for stronger state-wide building codes as a way to decrease losses for homeowners,” Roth said
One of the major causes of the availability and affordability problems facing homeo