Catastrophe Insurance (C) Working Group
September 29, 2007
The Catastrophe Insurance Working Group met on September 29, 2007 during the NAIC’s Fall National Meeting. During the meeting the Working Group:
- Heard a legislative update from Ethan Sonnichsen (NAIC), The Working Group learned that the House Financial Services Committee was using H.R. 3355 as the vehicle for moving natural disaster legislation. The bill has two titles. The first title establishes a consortium of participating states to package catastrophe risk and sell it to reinsurers or the capital markets. The second title enables liquidity and catastrophe loans that allow state reinsurance mechanisms or residual market mechanisms to partner with the Federal Government to spread the risk of catastrophe loss over a long time period.
- Discussed a proposal developed by South Carolina Insurance Director Scott Richardson to create a system that allocates insurance loss between wind and water events. The proposal suggests that when both wind and water perils are involved, the damage would be allocated using a predetermined pro rata allocation method when the cause of loss is indeterminable. The Working Group plans to further explore this concept.
- Discussed a proposal from the Travelers to create a private market solution to address hurricane risk by enabling a coastal zone from Texas to Maine for homeowners policies. The proposal would create a federal mechanism to oversee rates and policy provisions to ensure a stable, uniform environment. Risk-based rates would be used with premium adjustment mechanism created to adjust rates if modeled rates do not match actual experience over a 10-year time period. Phase-in subsidies would be provided for the economically disadvantaged to help them afford the coverage. Enactment of a tax-deferred catastrophe reserve and mandatory participation in the National Flood Insurance Program are program features.
- Agreed to hold another public hearing in conjunction with the NAIC’s 2007 Winter National Meeting. The focus of the hearing would be the impact that financial rating agencies have on catastrophe insurance markets.
- Decided that a final vote would be taken on its white paper Natural Catastrophe Risk: Creating a Comprehensive National Plan at the 2007 Winter National Meeting.
Action Items
- The Working Group agreed to hold a public hearing in conjunction with the NAIC’s 2007 Winter National Meeting.