Part of the coastal property insurance solution for Cape Cod and other seaside communities in Massachusetts could lie beyond the state’s own borders.
Massachusetts Insurance Commissioner Julianne Bowler, in remarks in an exclusive interview in the Nov. 8 edition of Insurance Journal, said her department is looking into a regional catastrophe fund that brings together Northeast states.
The Massachusetts Division of Insurance has broached the idea of a catastrophe fund along the lines of the facility that is winning industry accolades in Florida following the hurricanes. But Bowler’s staff has determined the catastrophe problems —and the solution— are bigger than the geographically-challenged Bay State.
“The Florida model has worked and worked well. We looked at copying the Florida cat fund. However because Massachusetts is so small, if we just did it for only Massachusetts, it wouldn’t work,” she said. One state or even the entire New England region represents too small a base of insurers and premiums on which to build the fund, she said.
Instead, what might work is a northeast regional catastrophe fund that brings in the premium volume from states of New York, New Jersey, maybe even Pennsylvania, along with the New England states’ volume. “We’ve had a number of independent conversations with our peers in other states and there definitely is interest,” Bowler offered.
The prospect of a regional cat fund is complicated by the fact that due to geography, weather, economies and other factors, each state even within the Northeast has a different worry. While Long Island, Cape Cod and Rhode Island may share concerns over coastal catastrophes, New York City and the District of Columbia view terrorism as their biggest catastrophe risk.
“So the question is whether there is a way to develop a cat fund that can meet the needs of individual states,” Bowler said, adding that it will take cooperation among legislatures of the various states if it were to ever happen.
The complete interview including comments on auto insurance refoirm, the probe of brokers and commissions and the contributions of the insurance industry can be read in the Nov. 8 edition of Insurance Journal East.
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