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Jessica
Hanson
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Phone:
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850-320-2955
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Jessica.Hanson@pciaa.net
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Insurers Join Governors in Seeking Long-term Solutions
for Emergency Preparedness and Catastrophe Insurance
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BILOXI, MS. – As the peak of the 2009 hurricane season
approaches, the Property Casualty Insurers Association of America (PCI) joins
the nation’s governors to address emergency preparedness and catastrophe
insurance at the 101st Annual Meeting of the National Governors Association
(NGA) on the Mississippi Gulf Coast.
“PCI applauds Governor Haley Barbour and the NGA for
making emergency preparedness a top priority at this year’s annual meeting,”
said David Sampson, president and chief executive officer for PCI. “Balanced insurance
public policy at both the federal and state level is critical for natural
disaster preparation and recovery. The insurance industry is financially strong
and prepared for hurricane season. But we must together begin preparing and
building the capacity of the market to pay for losses the nation will face in
the future.”
Experts agree that America faces the prospect of more
frequent and severe natural disasters in the coming decade. “This increasing
exposure to natural disasters is exacerbated by the dramatic increase in
population growth and real estate prices in the most disaster-prone areas,”
said Sampson. Over the past few years, homeowners insurance markets have been
tested as never before. Catastrophe losses in 2005 totaled almost $62 billion,
nearly doubling the previous record losses in 2001. The 2008 hurricane season
produced an estimated $11 billion in insured losses.
“Property casualty insurers are ready to help shape
solutions that address the needs of consumers, insurers, and government,” said
Sampson. “We must work together to strengthen homes and businesses, keep
families safe and rebuild our communities should a disaster strike.” On the eve
of the NGA meeting, PCI urges governors and insurers together to address the
following fundamental issues as integral components to protecting our nation:
Reduce Exposure to Catastrophe Losses:
“State and local governments should enact and enforce responsible building
codes and discourage irresponsible development in unsafe areas through better
land use regulation,” said Sampson. PCI supports stronger building codes as one
of the most effective ways to prevent storm damage and urges states to improve
outdated and inconsistent requirements for building codes and code enforcement.
”Taking proactive steps to build stronger homes and
harden existing homes through mitigation not only protects our loved ones and
most valuable assets, it directly helps strengthen our property insurance
market on both the state and federal level,” said Sampson. “We cannot control
the frequency or severity of a storm, but we can control how our homes are
built. The storm-proofing of structures is the most effective way to reduce the
costs of homeowners insurance and bring long-term stability to the property
insurance market.”
Lawmakers in South Carolina have taken innovative steps
toward reducing exposure to catastrophe loss. In 2007, South Carolina
implemented consumer tax credits for retrofitting and mitigation measures taken
to strengthen their homes, tax deductible savings accounts to help consumers
pay for hurricane losses, and a grant program to assist homeowners in
strengthening their homes to better withstand the devastating effects of a
major storm.
Fix the National Flood Insurance Program:
Congress can help ensure that the public is prepared for storm damage by
reauthorizing the National Flood Insurance Program (NFIP). “We believe that
reforms to the National Flood Insurance Program are needed to provide better
coverage to consumers, generate more participation from consumers in
flood-prone areas, and enhance mitigation efforts to reduce or eliminate repeat
losses on the same properties,” said Sampson. “The NFIP is critically important
to Americans and the U.S. economy, and we urge Congress to make the necessary
reforms to meet the needs of individuals and businesses across the country.”
State and Federal Government Involvement:
“Current debate in Congress as well as recent legislative action in Florida, North
Carolina and Texas have highlighted the need for government to also be
prepared through balanced insurance policy,” said Sampson. “PCI believes there
is a role, properly structured, for government and insurers to work together to
protect consumers.”
Many states along the Gulf and Atlantic coastlines have
residual insurance markets for high risk home and business owners along the
coast. These state-run property insurance providers play an important role in
these markets. But experience in some states show that there are dangerous and
costly results when a state-backed coastal insurer is underfunded and
unprepared for a catastrophic risk. Lawmakers and regulators in Mississippi, Louisiana,
and South Carolina have implemented responsible strategies that encourage
private capital to insure the state through balanced coastal policies and the
promotion of stronger homes through mitigation. “PCI supports state
policymakers in reducing the size of coastal residual markets to spread
financial risk to the private market and better protect homeowners,” said
Sampson.
This year, Florida lawmakers took positive steps toward
reducing their potential for a massive insolvency of the state-run Citizens
Property Insurance Corporation as well as starting to reduce the exposure of
the Florida Hurricane Catastrophe Fund. However, while Florida consumers are
still significantly at risk if a major hurricane strikes this year, PCI is
pleased that state leaders have realized the enormous financial risks that
their constituents face and have started to take steps to rectify the
situation.
Texas residents and lawmakers have similarly looked at
ways to manage the state’s hurricane risks and reduce the unlimited exposure to
the industry from the Texas Windstorm Insurance Association (TWIA) as well as
the potential tax revenue loss as they pick up the pieces following a painful
2008 hurricane season with Ike and Dolly. This year, the Legislature championed
important reforms to TWIA that will reduce the public footprint and encourage
more private sector capacity and competition to return.
One of the last states to address an underfunded state
coastal insurance system is North Carolina. State lawmakers are currently
looking to reform the North Carolina Joint Underwriting Association, known as
the Beach Plan before the 2009 Legislative Session adjourns. “PCI supports
reform of the Beach Plan as a key step to assuring that the North Carolina
insurance market is prepared to respond to a hurricane and to assure market
stability for policyholders statewide,” said Sampson. A major hurricane hitting
the state could leave a $6 billion hole and bankrupt the state insurance
company and lead to massive assessments (there is currently no cap) for
insurers. This is a statewide problem and PCI has led the industry in seeking
reforms to protect consumers.
“Insurers remain committed to preparation, protection
and recovery as the nation enters the peak of hurricane season and debates
catastrophe insurance at the federal and state level,” said Sampson. “Our goal
is to clarify and formalize the role of private insurers and the government so
that families, homes and businesses are protected and disaster victims obtain
relief following a tragic event. We must also ensure a financially sound method
of funding catastrophe losses without unfairly burdening insurance
policyholders and taxpayers who are less prone to large scale natural
disasters.”
PCI is composed of more than 1,000 member companies,
representing the broadest cross-section of insurers of any national trade
association. PCI members write over $176 billion in annual premium, 36 percent
of the nation’s property/casualty insurance. Member companies write 43.8
percent of the U.S. automobile insurance market, 29.6 percent of the homeowners
market, 32.8 percent of the commercial property and liability market, and 38.4
percent of the private workers compensation market.
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