Meeting today’s challenges, preparing for tomorrow’s

Weather forecasters predicted that the 2005 hurricane season could be more active than normal, but no one thought it would produce 26 named storms and the most destructive storm on record–Hurricane Katrina.

Katrina tested the mettle of the insurance industry and highlighted weaknesses within the nation’s emergency response system. Yet it also demonstrated the incredible value of our products and services to individuals, communities and the nation’s economy. We were–and are–there when people need us most.

Following the storms, catastrophe teams moved in and began to settle claims quickly and fairly. Adjusters, many whose own homes were damaged or destroyed, drove for hours and slogged through receding floodwaters to access the affected areas. Facing blocked roads, gas shortages and no electricity, insurance professionals relied on ingenuity, dedication and expert training to get the job done. The effort was impressive and inspiring.

Yet there will always be those for whom the best is not enough or who see personal opportunities in others misfortune. We saw examples of that in the wind versus water lawsuits filed in Mississippi and Louisiana. While we will fight legal battles in courthouses from Biloxi to Baton Rouge, at the end of the day, our industry’s performance in the field will win the day.

The Gulf region’s recovery is underway, thanks in large part to the insurance policies that protect individuals and businesses and the dedicated professionals whom made sure that claims get paid.

As we look ahead to the next hurricane season, there are several pressing public policy issues that will be debated in the Gulf region and across the country. At the forefront is the question of how we, as a nation, will finance losses from future mega-catastrophes. Economic and political issues complicate the search for a solution. On the economic side, insurers are faced with disasters that could jeopardize the financial stability of the entire industry and, as a result, destabilize the U.S. economy. On the political front, there has historically been very little support from legislators in less disaster-prone states for federal involvement in a national disaster insurance program.

Any catastrophic risk program–whether state or federal-based–should promote personal responsibility, support reasonable building codes and land use requirements, maximize risk-bearing capacity of the private markets, and provide quantifiable risk management to the public and private participants in the program.

Another important issue involves the approach states take to regulating the insurance industry. Without a doubt, the insurance industry is a key component in the recovery of a community following a disaster. Our claims-paying ability jumpstarts the economy. Banks are willing to make loans, businesses re-open, homes are repaired and jobs are created as a result of this infusion of needed cash. However, none of this can occur if lawmakers and regulators take a heavy-handed approach to regulating private insurers.

Over-regulation has a negative impact on the insurance marketplace. It stifles competition, limits consumer choice, and drives up the cost of coverage. This approach drives insurers out of the market and residual market program to become the preferred market rather than the market of last resort.

Proposals that would impose moratoriums on changes to rates and coverage or unduly limit an insurer’s ability to contract or expand their market share unwisely politicize the business decisions companies should be making based on economic realities. And litigation–no matter how meritless–can also have a negative influence on the marketplace.

There are proactive measures to mitigate the damage from next year’s hurricanes. Building codes are one of the most cost-effective ways to prevent damage, protect property values, and speed the recovery process after a disaster. While Louisiana passed a statewide building code during a special session of its Legislature, other states such as Mississippi and Alabama have work to do in strengthening their code requirements, as does Florida’s panhandle.

But stronger building codes are of little value unless enforced. State lawmakers must ensure that local building inspection departments are adequately funded and staffed with qualified personnel. The Property Casualty Insurers Association is encouraging Congress to provide short-term assistance to states that enact tougher building standards, so that they can administer and enforce enhanced codes.

The 2005 hurricane season devastated a vitally important region and its wake impacted every American. But it also caused the country to take a close look at how major catastrophes should be managed and paid for, and how we can better protect ourselves, both as individuals and as communities, when the next disaster strikes. The record-breaking hurricane season put many issues on the table to debate and find solutions for, and it is our challenge as regulators, industry leaders and citizens to work together to find these solutions.

Greg LaCost is assistant vice president and regional manager for the Property Casualty Insurers Association of America.