Anita Lee profiles the latest multi peril trial ballon from the Hartford we discussed yesterday here. The Sun Herald story contains a link to the pdf and has a quote from Ramani Ayer, CEO of The Hartford. Anita also quotes Brian Martin who isn’t as enthusiastic.
The nugget buried in the story is the provision requiring coastal homeowners to carry flood insurance, a trial balloon floated by Senator Dodd since the recent Iowa flooding.
The Hartford Financial Services Group has stepped forward with a plan to keep wind coverage in the private market by offering insurance companies protection to cover catastrophic risks and consumers tax breaks or subsidies to buy coverage.
“It’s a great thing that more companies and more legislators and senators are grappling with this issue,” Ramani Ayer, CEO of The Hartford told the Sun Herald on Friday. “The present system, in my way of thinking, is not working.
“We are one storm away from a very severe crisis.”
The Hartford’s plan calls for states and the federal government to offer insurance companies coverage at cost in case of major catastrophes. Insurance companies would buy the coverage, or reinsurance, on the private market to help cover damage from smaller storms.
States would provide reinsurance for hurricanes likely to occur only once every 50 years, while the threshold for federal reinsurance would be once every 100 years. Those numbers, Ayer said, are up for debate. Costs associated with the federal and state reinsurance programs, operating under federal guidelines, would be identified on insurance bills and paid by consumers.
States, which now regulate insurance rates independently, would be required to allow insurance companies to charge rates sufficient to cover their risks. States also would have to meet federal hurricane mitigation standards in order to offer reinsurance.
Consumers could save for coverage through an IRA-like account. The plan also calls for state subsidies to help low-income and senior citizens with insurance costs.
“They appear to be willing to collect more premiums, but they put most of the additional risk on taxpayers,” said Brian Martin, senior policy adviser to U.S. Rep. Gene Taylor, D-Bay St. Louis.
Taylor continues to push for wind coverage through the National Flood Insurance Program, which would end the kind of debate still going on almost three years after Hurricane Katrina. Even insurance claims executives have said it is almost impossible to tell in cases where only a slab is left if hurricane wind or water caused the damage. NFIP currently covers only water damage.
Taylor is a conferee on whether wind coverage should be added to the bill that would reauthorize NFIP. The House approved his bill earlier this year, but it failed in the Senate. Sen. Chris Dodd, D-Conn., is a leader on the committee and also hales from The Hartford’s home state.
As we stated yesterday the writers of slabbed share Rep Taylor’s deep reservations about the Hartford plan.
Sam Friedman has several excellent recent posts but had especially good timing yesterday with his entry Consensus Needed On Competing Cat Plans. Sam has a different take looking at the situation from New York urging an industry summit so insurers that support the multi peril concept can speak with one voice. Implied in Sam’s entry is a dislike for the Hartford Plan as he labeled it a “scheme”:
I’m not going to go into the specific elements of each plan in this space, but I can’t help believing Congress will get a headache and tune out all the various proposals with so many different plans being put forth by insurance industry bigs.
Why, just last month, the IIABA and CIAB, along with Travelers and Nationwide, joined together to promote their own plan to spread coastal windstorm risks across state borders. (Click here to read more about that effort.)
The problem is that everyone has their own plan to pitch. Why can’t they just convene a cat summit and agree on one proposal? Maybe then they would have a chance of getting some serious attention in Congress and the state legislatures.
IMHO these plans are receiving serious attention in Congress. Anita Lee has faithfully reported the viewpoint of one of the NFIP re authorization conferees in Representative Taylor. Senator Dodd was no doubt heavily consulted by The Hartford as they developed their plan.
A cat summit is not be a bad idea though it must happen quickly. The NFIP expires September 30 so time is short. Indications are whatever we get out of Congress this year will be a band aid with the permanent fix happening in the next administration and congress.
sop
Damn! Just one Little Bat Signal–and y’all jump on it like a hungry Catahoula (Pun Intended:) and forkin’Rip It Up!
Deconstruction Made Easy…or at least intelligible.
I’m waiting with Baited Breath for the Comic Book: “slabbed” with our Supa’Hero, who by day is a mild mannered paralegal just trying to rebuild after The Storm, but at night morphs into, you guessed it, The Slabberwaki …jingling, boisterous, bounding trickster jester of the dockets!
Voodoo’Chile Attorney of downtrodden Policy Holders!
Bane’dog of CATs, adjusters and underwriters!
Slaaa’yahz of da’Arch Evil Venal Insurers: Black Traveler, State Sweet Potato’head Penis Farm, NoState, Darkford…
Whoa! Don’t git me started…
Editilla
But really, this is a pretty damn thorough treatise. Way better than the initial seed article from the Currant.
You should, like, go national wit’it…or whateva one does with such work…Forbes, Bloomberg, Slate. This is better than all’dat and even Mother Jones and Utne Reader.
Get wit’it, Noble Mon.
Save us from da’Infamy!
galette l’infamie
Editilla…’sssbean drinking bourbon again 🙂
You’re too kind Editilla. If you like these I’ve been shuffling around a doozy of a post in that Wall Street Journal story you linked weeks ago. It takes a while to break these issues down and make the concepts understandable but keep an eye out for it.
When we hit NOLA this fall, first bourbon is on me.
sop