Industry Issues | Catastrophic Risks

Public Policy Solutions for Catastrophe Insurance
Countless experts agree that America faces the prospect of more frequent and severe natural disasters in the coming years. 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. This not only increases the economic cost of recovery, but also leaves a growing number of Americans with a large portion of their personal net worth exposed to catastrophic loss.

While APCIA members undoubtedly have the financial capacity to meet its obligations this year, the burning question is whether the market has, or is building, the capacity to pay for the risks that American families face in the coming years.

There is no shortage of commitment from the insurance industry to meet the challenges that could potentially occur. However, there are several fundamental issues that have to be addressed:
  1. America clearly faces the prospect of increased frequency and severity of major hurricanes and the continuing threat of other major natural catastrophes including earthquakes, floods, tsunamis, and volcanic eruptions;

  2. Our country is experiencing significant development, population growth, and rapidly rising real estate prices in areas that are highly prone to natural disasters;

  3. A growing number of Americans have a significant and increasing portion of their net worth exposed to catastrophic loss;

  4. Insurers operate in an environment where prices and coverages are highly regulated and generally are not allowed to respond freely to changing risks or conditions as opposed to one that relies on private markets to solve these problems with prices set according to the risks assumed; and

  5. States frequently have outdated and inconsistent requirements for building codes, code enforcement, and other prevention/mitigation tools in areas dangerously exposed to disasters. These weaknesses imperil lives, property, and policyholder resources.
These issues demand action. And property casualty insurers are ready to help shape real solutions that address the needs of real people.