Natural Catastrophe Commission Bill Provides For Important Examination of Disaster Mitigation, Relief

Post by palado

August 1, 2007

WASHINGTON—A natural catastrophe commission bill scheduled for consideration today by the Senate Banking Committee would provide for an important examination of how best to mitigate disaster risks and deal with the after-effects of these events, according to the Property Casualty Insurers Association of America (PCI).

The bill establishing a commission to look at the various aspects of natural disasters and insurance includes evaluating whether there may be catastrophe exposures that are beyond the capability of the private market and individual state catastrophe funds to address. PCI believes that there is a need to encourage new capital to enter property insurance markets and facilitate innovative ways to cover difficult risks through enacting greater regulatory flexibility and lower regulatory costs. The commission's duties, as outlined in the bill, include looking at these issues as well as enactment and enforcement of tougher standards for building codes, property development and other loss prevention and mitigation requirements that are also vital when looking toward the future and evaluating this issue.

“PCI believes that developing and enacting effective public policy to address future natural catastrophes is one of the most significant issues facing the insurance industry,” said June Holmes, PCI’s interim CEO. “Experts agree that the nation faces the prospect of more frequent and severe natural disasters in the coming decade. Moreover, significant property development, population growth, and rapidly rising real estate prices in areas prone to natural disasters exacerbates the potential for increasingly larger human and economic losses as a result of such disasters, requiring stronger mitigation as well as greater financial resources to fund future recovery and repair efforts.”

PCI believes that it may be necessary for the federal government to offer liquidity protection to state catastrophe funds at the highest level consistent with the maintenance of stable markets and avoidance of widespread insurer insolvencies. It is also essential that any federal program include measures intended to promote freedom for markets to respond to these exposures, including meaningful limitations on the ability of participating states to control and/or suppress property insurance rates or to maintain other unnecessary restrictions. PCI is pleased to see that the bill includes an evaluation of federal and state regulatory issues as well.

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