Catastrophe Insurance (C) Working Group
Catastrophe Insurance (C) Working Group Page
Joint Executive (EX) / Plenary Committee Summary Report
Winter 2009 Meeting Summaries Index

The Catastrophe Insurance (C) Working Group met Dec. 7, 2009. During this meeting, the Working Group:

• Heard from Harriett Kinberg (Federal Emergency Management Agency—FEMA) on the National Flood Insurance Program (NFIP), which was recently extended by the U.S. Congress with hopes it will be extended next year for a long-term extension. NFIP has been actively involved in training agents with online courses, webinars and instructor-led classes. NFIP is proving insurance departments with continuing education information for agents on a continuous basis, but there are associated fees. FEMA would like to have the fees waived, because they are a government agency providing a valuable service and it impacts their overall results. They have communicated with the Producer Licensing (EX) Working Group, which is open to dialogue on the issue. FEMA also would like to obtain current e-mail lists of active agents from insurance departments; have flood training included as a requirements in continuing education requirements; and would like insurance departments to require advance flood training of all agents.

• Agreed to work with the Producer Licensing (EX) Working Group on the issues raised by FEMA.

The Working Group also held a public hearing on Chinese drywall. The hearing focused on determining the scope of the problem; whether homeowners insurance policies provide coverage for property damage claims related to the installation of defective Chinese drywall; whether homeowners insurance policies provide coverage for health claims related to the installation of defective Chinese drywall; the extent of product liability insurance coverage or construction defect coverage for the installation of defective drywall. During the hearing, the Working Group heard from:

• Eric Nordman (NAIC), who provided an overview on the exposure from Chinese drywall imported into the United States between 2004 and 2007, which caused an impact in property damage and bodily claims. The drywall has been installed in more than 100,000 homes in 32 states, and the Consumer Product Safety Commission has recorded nearly 2,100 reports of defects. There are costs to repairing homes, increased health costs, legal fees for the plaintiffs’ lawyers, defense costs and indirect costs. The affects from tainted or toxic drywall extends to U.S manufacturers, as well.

• David Kodama (Property Casualty Insurers Association of America—PCI), who said insurance companies will continue to review each claim to determine coverage as this is a complicated issue as, although there is correlation from drywall, there is no direct causation from the drywall.

• Amy Bach (United Policyholders), who said that the impact includes renters, homeowners, contractors, builders and suppliers. There are widespread stories on issues and more information needs to be gathered. She said she hopes there will not be a panic situation, even though the potential exists for the overall dollar impact to exceed the hurricanes in 2004 and 2005.

• Charles Miller (Insurance Law Center), who testified that he believes regulators should conduct multi-state examinations of insurers to check their investigation protocols of the companies are appropriate and to develop a model guideline on the protocols to be followed in investigating Chinese drywall claims.