NAIC Adopts GuidelinesFor Federal Terrorism Re Role
The National Association of Insurance Commissioners has adopted a set of principles it can use to evaluate federal terrorism insurance legislation.
“The NAIC members believe there is a role for the federal government to play, particularly in the near future, to stabilize the property and casualty insurance market,” said NAIC President and Kansas Insurance Commissioner Kathleen Sebelius. She added that the NAIC has been providing technical assistance and communicating with U.S. Treasury Department officials as they develop a proposed solution.
She called the principles “a balanced effort to leverage the experience of the state regulatory system with the need for some level of federal participation.”
The principles include a call for:
A “sunset” date for federal disaster insurance legislation so that the need for and design of the program can be re-evaluated.
Use of NAIC expertise by the government in any such program.
Encouragement of loss reduction and hazard mitigation efforts.
Participation of state residual markets and other pooling mechanisms, but in a way that does “not create incentives for business to be placed in those residual markets.”
Encouragement of tax law changes “to avoid penalties on, and encourage the accumulation of reserves for the portion of terrorism losses insurable in the private marketplace.”
Maintenance of jurisdiction by the states over claim-settlement practices.
Ms. Sebelius said the insurance industry “cannot withstand multiple events of the magnitude of the Sept. 11 attacks without harm to consumers and the industry's own health.” Therefore, the NAIC believes that the guiding principles will serve as “the yardstick against which we will assess federal legislation to spread the risk of loss and keep coverage available to those who need it,” she said.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 22, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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