A trade group for Connecticut insurance agents is urging lawmakers to abandon plans to create a state natural catastrophe fund.
The Professional Insurance Agents of Connecticut (PIACT) said the state’s Insurance and Real Estate Committee should oppose Senate Bill 530, which create the fund.
Although the association said it supports the concept of a public reinsurance mechanism for insurers, creating a state fund would be ill-advised without a federal backstop.
“A standalone, strictly state-based catastrophe funding mechanism would create a false sense of security for the state’s homeowners,” said Michael Keating, president of PIACT. “Without a federal plan in place, the state could fail to provide adequate cash in the event of a major disaster.”
PIACT said Connecticut should be prepared to consider a state-level fund only in the context of qualifying for a pre-existing federal plan. This would involve the federal government at high, statewide levels of loss, so that traditional insurers could be correctly reserved for low-frequency, high-severity events.
“Until a decision is made on the national level, creating any kind of regional fund is the wrong choice,” Keating said.
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