WASHINGTON – July 15, 2008 – The Council of Insurance Agents & Brokers today joined with two major insurers and another agent/broker association in urging enactment of a four-pronged approach to the availability and affordability crisis for coastal wind coverage that would spread the burden among all affected coastal property owners from Texas to Maine.
The proposal is also being supported by The Travelers Companies, the Independent Insurance Agents & Brokers of America, Inc., and Nationwide Insurance Companies. Council President Ken A. Crerar joined the leaders of those entities in backing the outlined approach presented to the chairmen and ranking members of the Senate Banking Committee and the House Financial Services Committee.
Noting that more than half of all Americans live within 50 miles of the nation’s coasts and the collective value of coastal properties from Texas to Maine is nearly $7 trillion, the group contends that preserving the status quo, where a vast number of those living on or near the Gulf and Atlantic Coasts do not have access to affordable property insurance, is unacceptable.
“Hurricanes don’t respect state borders, and putting in place a set of uniform rules for insurers that would apply to the entire coastal zone from Texas to Maine just makes common sense,” Crerar said. “Under this proposal, those subject to the same risk can share in the cost of their protection, but those who do not face the same risk will not — and should not — be charged.”
The “Four Pillars” approach to named windstorm coverage would:
- Implement a uniform set of rules for insurers that would apply to coastal zones from Texas to Maine in the event of a named wind storm, allowing insurers to spread the cost of risk among as many people as possible who are subject to the same risk.
- Require insurance companies to set risk-based and actuarially sound rates using approved standards and certified windstorm risk models, effectively making the rate-setting process transparent.
- Establish a cost-based federal reinsurance program for insurers for extreme events including multiple losses from one or more major events in a single season. The reinsurance would be available at cost, without federal subsidy, and carry a requirement that insurers would pass any savings directly on to their customers.
- Implement a detailed mitigation program to encourage strong building codes, incentives for state and local adoption and enforcement of those codes, enhanced construction technology and land use planning requirements.
“This is a thoughtful new approach to solving the coastal wind insurance problems, and it uses the free market mechanism that has worked so well for so long,” Crerar said. “We consider this a courageous new idea that offers a realistic and workable solution to natural catastrophes, and we hope members of the House and Senate will give it serious consideration before we face another Katrina-type disaster.”
Founded in 1913, The Council is the premier association for commercial insurance and employee benefits intermediaries. The Council represents the leading commercial brokers and agents in the United States and abroad. Council members annually place 80 percent of all commercial property/casualty premiums in the United States and administer billions of dollars in employee benefits accounts. www.ciab.commeg.Tags: Council of Insurance Agents & Brokers (CIAB)