A new research report from the TowerGroup finds that “without a concerted effort by all parties to support a holistic solution to catastrophe management, the dire predictions of insolvency in the insurance sector and general economic upheaval across the United States may come to fruition.”
After 2005, which Tower notes was the “the worst year on record for insured catastrophe damage in the U.S., with losses estimated at $56.8 billion,” it is becoming increasingly apparent that more coordinated responses are necessary. There is a real need to “rethink catastrophe management beyond the much publicized issues around hurricanes.”
Karen Pauli, a senior analyst and the newest member of TowerGroup’s Insurance research practice, who authored the report, stated: “A workable solution for containing loss requires the federal government, insurance carriers, and the general public to do their part to help mitigate risk — each focusing on areas they can reasonably impact. The federal government should enact meaningful laws, the insurance industry should develop supporting products, and members of the general public should become more proactive in protecting their property. It will take all three of these interested parties working in concert to effect the long-term change needed to reduce the risk posed by today’s catastrophe landscape.”
Tower said highlights of the research include:
— The insurance industry and other concerned groups assert that the National Flood Insurance Plan needs a major overhaul. TowerGroup believes that by overhauling the program to reflect current real estate values, as well as to eliminate subsidies for individuals whose properties are repeatedly damaged by catastrophes, the plan can provide more support to those hit hardest.
— By developing new products and better educating their consumers, TowerGroup believes the insurance industry can play a larger role in improving the current response to catastrophe risk and changing the unsafe activities of policyholders.
— In addition to new approaches from the insurance industry and Federal, state and local governments, TowerGroup notes that the general public must also take increased responsibility for reducing the financial impact of catastrophes — including understanding the dollars-and-cents consequences of choosing to live in areas subject to repeated catastrophes.
— As a matter of public policy, the time may be approaching to call a halt to the rapid and concentrated development in catastrophe zones.
“The federal government needs to take action with effective laws and enforcement to ensure that strict catastrophe-related building codes are in place in all states,” Pauli continued. “Robust tax benefits must be instituted so that insurance carriers and consumers will take steps to insulate themselves from the extreme impact of catastrophes. Solutions like these are not easy to implement, but the catastrophe impact of the past several years requires new thinking. Now is not the time for the same old resolutions.”
Pauli joined Tower from OneBeacon Insurance, formerly Commercial Union, where she served as assistant vice president. In addition to directing development projects involving automated underwriting, predictive technologies, and agency point-of-sale functionality, she led product development projects, legislative compliance efforts, and underwriter training. Previously, she headed the underwriting audit function in the home office of Crum & Forester, establishing measures and conducting field reviews. Pauli began her career in insurance at Safeco in personal lines underwriting, managing a team of underwriting professionals and responsible for territorial profitability. At TowerGroup, Pauli covers a broad range of issues related to the application of technology in the insurance industry.
The TowerGroup research report titled “Property and Casualty Insurance: Convergence in Catastrophe,” is available to qualified members of the press for review. Next month TowerGroup will be releasing a complement report on how insurers can leverage technology in support of their catastrophe management efforts. Those interested in purchasing a copy of any TowerGroup report or subscribing to a TowerGroup research service may call +1.781.292.5200 or email: firstname.lastname@example.org.
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