Commissioner Announces Adoption Of National CAT Commission Resolution
– On Sunday, Florida Insurance Commissioner Kevin McCarty announced the adoption of a Resolution in Support of a Comprehensive Legislative Solution to the Problems Presented by Natural Catastrophic Exposures by the National Association of Insurance Commissioners (NAIC) Executive Committee during its summer 2006 meeting in Washington D.C.
"This is a step in the right direction for the nation and Florida," Commissioner McCarty commented, "I continue to believe that catastrophe losses are not an insurance problem, but an economic security problem. Catastrophe losses are not a local problem, but a national problem. I am pleased to see that we have support from the NAIC to urge Congress to pursue a solution."
Momentum has been building for a national solution following the $70 billion in damage caused by the 2004-2005 hurricane season. Commissioner McCarty is spearheading an effort as chairman of the NAIC's Catastrophe Insurance Working Group to reach agreement on a National Catastrophic Plan Proposal. The NAIC's resolution to Congress encourages appointing a National Commission to develop its own national catastrophe plan. The NAIC envisions the National Commission creating its own proposal while relying on the expertise pledged by the NAIC.
"A consensus is building for a real solution, and we continue to garner support," McCarty continues, "The NAIC and I will use this opportunity to lobby Congress to enact federal legislation to make our plan a reality."
The resolution aims to create a Federal Natural Catastrophe Commission designed to hold in-depth hearings to consider the feasibility of adopting legislation that, among other things, would:
- Create strong incentives for states to adopt internationally recognized, risk-based building codes.
- Create incentives for cost-effective catastrophe loss mitigation efforts, including retro-fitting of existing properties. Consideration should be given for the federal government to work with state and local governments, industry, and consumers to leverage local resources and expertise.
- Consider recommendations that build upon the effective results and partnerships of state-based regulation.
- Consider recommendations for population growth in geographic areas in which the risk of property loss due to a catastrophe is heightened, evacuation of residents, and improving communications to buyers who purchase properties in these areas.
- Encourage states to establish privately funded, tax-exempt entities, called "catastrophe funds," through which private insurance companies set aside monies to pay for covered losses.
- Allow individual insurance companies the ability to accumulate reserves on a tax-deferred basis to respond to natural disasters.
- Allow state catastrophe funds to purchase high levels of protection from the federal government for extreme events, with the price for such protection being actuarially sound and reflective of the difference of risk among states.
- Create a framework that encourages prompt community redevelopment after a disaster to ensure the recovery of the local economy and continued payment of mortgage.
- Evaluate whether a national backdrop for mega-catastrophes might attract more insurance capital, thus increasing competition and resulting in more affordable property coverage in catastrophe prone areas.
The NAIC has pledged its resources and expertise to assist Congress in the drafting of legislation that will help Americans find private insurance protection from natural catastrophes for their homes, while reducing the demands on governmental resources to assist victims after an event occurs.