A federal program that would provide an all-inclusive, “all perils” insurance policy nationwide is dividing two prominent industry groups.
The American Insurance Association (AIA) is part of an industry effort opposed to the National Association of Insurance Commissioners (NAIC) adoption of a resolution supporting the need for a federal solution to manage natural catastrophe risks.
“The proposed resolution is based on the flawed assumption that the insurance industry lacks the capacity to manage the risk of natural catastrophes and that federal legislation creating a natural catastrophe reinsurance program is needed,” said Tammy Velasquez, AIA vice president and director, state affairs.
NAIC's plan, explained last month by former Property Casualty Insurers Association lobbyist Julie Gackenbach at the National Underwriter-sponsored ACE conference (parent company to Claims Magazine), calls for a complex, three-layered approach that involves policyholders and private insurers, creates a state fund specifically for catastrophes, and effectively makes the federal government a reinsurer.
According to the proposal, insurance carriers would be required to provide coverage for most natural catastrophes, including earthquakes, floods, and hurricanes. All states would be required to participate and contribute funds to the federal program and implement a fraud program. The ultimate goal of the proposal is to promote policyholder responsibility, support reasonable building codes, maximize the risk-bearing capacity of the private market, and provide quantifiable risk-management data to the federal government.
Gackenbach also spoke about the current role of the federal government when a disaster area is declared and how the NAIC's program would improve response.
“In many cases, the federal government is already the insurer of last resort,” she said, who is now a member of the GH Group that represents insurance interests. “We write a lot of checks and fly over the affected areas, but it's not very organized.”
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