WASHINGTON, D.C. -- The Reinsurance Association of America endorsed the proposed Natural Disaster Protection Act and recommended some significant changes at a recent Senate Commerce Committee hearing.
RAA President Franklin W. Nutter said the measure, S. 1350, builds on available capital resources worldwide for insurers to protect against natural catastrophes, and yet maintains insurance markets that would otherwise be threatened by "truly catastrophic natural disasters."
Since the bill was introduced last August, Mr. Nutter said the RAA and the Natural Disaster Coalition have had many meetings with congressional staff, administration representatives and other private and governmental representatives with an interest in natural hazards. As a result of those meetings, a number of changes in the measure have been proposed.
Mr. Nutter emphasized that improved participation by insurers in the National Flood Insurance Program will be necessary in order to address all natural hazards.
He said the recommended changes were designed to insure that the insurance industry is fully committed to the program and operates within it in a fiscally responsible manner.
These changes include provisions to clarify that participating insurers must provide the federal government's earthquake coverage, and it must be added to each homeowner's policy.
The coalition also added a new insurance purchase requirement for residential properties in earthquake-prone states that must be covered by earthquake insurance to qualify for a new or refinanced "federally related mortgage loan."
A new provision has been added to strengthen the reinsurance borrowing authority so that companies could not drop out of the program until all federal borrowing is fully repaid with interest.
The bill also has been clarified so that only private insurers and reinsurers licensed to write in the United States can qualify for the reinsurance, Mr. Nutter said.
Texas Insurance Commissioner J. Robert Hunter urged Congress to take a "go-slow" approach toward enacting a federal earthquake insurance program and a federal safety net for insurance companies hit hard by hurricanes and other natural disasters.
"I believe the federal government should not get involved in another primary insurance program at all," Mr. Hunter told the committee. "There is no evidence I've seen yet to indicate that earthquake insurance is not available, although deductibles are very high," he added.