Commissioner Calls For National Catastrophe Fund, Tax-Deferred Catastrophe Reserves
Contact: Beth Scott
Tallahassee – Florida Insurance Commissioner Kevin McCarty said with the specter of projected hurricane losses from Hurricane Katrina topping $25 billion, he is intensifying his support for creating a national catastrophe fund and a federal mega-fund for state disaster relief.
"Last week we were discussing record surpluses for the property/casualty insurance industry in 2004," McCarty said. "Monday, Hurricane Katrina wiped out the majority of that surplus gain."
McCarty says the insurance industry, states and the federal government should work together to share that load. Rapidly rising insurance costs already are having a negative effect on local economies and with a near-record number of hurricanes expected again this year, insurance companies and customers face more financial hard times.
Since Hurricane Andrew hit Florida in 1992, the Commissioner and the state of Florida have been counted among a growing number of public and private organizations proposing changes in the way large disasters are handled.
McCarty says one of the groups examining possible solutions is the National Association of Insurance Commissioners (NAIC), which provides insurance regulatory oversight.
The NAIC, in cooperation with the National Conference of Insurance Legislators (NCOIL) has been working on a strategy aimed at getting approval for a national catastrophe fund.
Another supporter is U.S. Rep. Mark Foley, R-Fla., who has sponsored a bill to amend the federal tax code to allow insurance companies to voluntarily set aside, on a tax-deferred basis, reserves to pay for future catastrophic losses. The United States is one of the few countries in the world that does not provide companies a way to accumulate reserves on a pre-tax basis.
McCarty also favors creation of a national mega-catastrophe fund to help cities, counties, states and insurers deal with large natural or man-made disasters.
"Katrina demonstrates that catastrophes are a national problem and we need to look at national solutions," McCarty said.
In November, a group of commissioners including McCarty is scheduled to meet in California to discuss long-term solutions to catastrophic risk, including hurricanes.