Right Street: A Plan for New York to Prepare for Catastrophes

Right Street Blog | January 8, 2013

New York State’s NYS 2100 Commission, created by Gov. Andrew Cuomo in the wake of Hurricane Sandy to offer recommendations on ways to better prepare for natural disasters, is out with its initial report, including a section on potential changes to the insurance environment.

Perhaps most notable is the recommendation that the report does NOT contain: any sort of expansion of the state’s residual market environment, such as a catastrophe fund. Cuomo’s commission appears to have justifiably learned from the mistakes of Florida, and focused their attention on looking for ways to harden the state’s infrastructure, improve mitigation and prepare for the future. Having the state government take over the property insurance market clearly isn’t the path to accomplishing any of those goals.

Instead, the report looks to more targeted and technical fixes to the insurance market. Some of the most important include:

  1. A consumer education and disclosure initiative to publicize the existence of wind damage and hurricane deductibles; any capped reimbursements in a policy; when coverage for mold exists and when it doesn’t; and the availability of flood insurance.
  2. A state study of why more consumers in floodplains do not purchase flood insurance, and whether the state should require flood insurance in places not currently required under federal law.
  3. A state study of anticoncurrent causation clauses, and whether the state should allow them, or whether market realities make them unavoidable.
  4. Studies on existing building stock and what kinds of risk reduction and mitigation are possible and cost-efficient.
  5. An examination of whether the state should establish a revolving fund to provide incentives or loans for mitigation.
  6. Allowing on-bill recovery of mitigation loans through insurance premiums.
  7. Authorizing insurers to provide “civil authority” business interruption as a separate line of business, which would provide BI coverage in cases where the government has ordered evacuations or shut down roads. This line of coverage could possibly be expanded to indemnify even in cases where the underlying peril (like flood) would not ordinarily be covered.
  8. An examination of whether to issue moratoriums on cancellations and non-renewals in the immediate aftermath of a major catastrophe.
  9. Providing expedited procedures to issue adjuster licenses after a catastrophe.
  10. More resources, such as hotlines and emergency response capabilities, from state insurance regulators.

We’ll continue to follow how the state’s legislators and regulators look to study and implement these proposals over the coming months.

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