A group of insurers says it hopes U.S. lawmakers will continue to focus on the need for affordable property insurance, an optional federal charter for the insurance regulatory system in America, and comprehensive flood insurance reform in 2008.
“2008 is shaping up to be another active year for the property/casualty industry,” said the American Insurance Association President, Gov. Mark Racicot. “AIA and its member companies look forward to engaging in a constructive dialogue and debate with policy makers on issues that affect our industry, which has provided protection and been our nation’s financial safety net for over 150 years.”
One topic that is likely to receive substantial attention from lawmakers is property insurance, especially for those homeowners living in coastal areas that have been impacted by recent hurricanes, says the AIA. Following the record storm losses in 2004 and 2005, property insurance markets in some states have become stressed – and in some cases, dysfunctional. Recent property insurance losses, coupled with data predicting that the U.S. is in the midst of a dangerous period of intensified hurricanes along the Atlantic and Gulf Coasts, have further destabilized the system.
“This is an issue of particular importance for our association,” continued Racicot. “AIA is committed to finding a workable solution for insuring our country against losses from natural catastrophes. This means working with Congress to enact meaningful reforms that allow the private sector to provide the kind of long-term financial protections and stability that policyholders need.”
Among the proposals that policymakers are considering is the creation of federal catastrophe funds (also known as “Cat Funds”). The AIA says that while these mechanisms appear attractive, they also promote “unwise and unsafe” property development, and leave problematic cost-drivers for insurers and policyholders unresolved.
“We do not want Congress going down the road of incenting the creation of additional mechanisms that would interfere with the private market’s ability to protect homeowners and businesses,” stated Racicot. “These Cat Funds fall short in addressing the problems in coastal insurance markets and would only serve to create long-term problems. AIA believes the solution rests in fostering, not displacing, the private sector’s ability to provide wind coverage to homeowners and businesses in the path of potential storms.”
Another prominent issue likely to see action this legislative session is reform of the insurance regulatory system. The AIA supports the creation of an Optional Federal Charter (OFC) that would allow insurers a choice of being regulated under a modernized federal system or by the current state-based system. More hearings are anticipated on the issue and the bipartisan bills that were introduced in the House and Senate will continue to be the focus of the debate.
“We will continue to build on the momentum generated with the introduction in 2007 of bi-partisan bills in both the House and the Senate,” stated Racicot. “Creating an optional federal charter would provide consumers all the benefits of an efficient, modern regulatory structure through increased competition and allow the U.S. insurance industry to compete more equitably on a global basis.”
Lastly, AIA hopes that Congress will reauthorize the National Flood Insurance Program (NFIP) which is set to expire in September of this year. The House has passed a comprehensive reform bill and the Senate consideration of their bill is a priority for Senate Banking Committee Chairman Dodd.
“AIA is a strong proponent of comprehensive flood insurance reform and we urge Congress to complete action on a NFIP reauthorization bill this year. At the same time, we will steadfastly oppose any inclusion of windstorm coverage to the NFIP, as included in the House-passed bill. Doing so would break the NFIP’s already burdened financial system and would encourage building in hurricane-prone regions, putting more people and property in the path of devastating storms.”
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