The American Insurance Association (AIA) announced it has submitted information regarding residual insurance markets and natural catastrophes to the Texas Joint Committee on Windstorm Coverage and Budgetary Impact for its Aug. 30 hearing in Corpus Christi.
“Writing property insurance in Texas can be a difficult proposition,” said Fred C. Bosse, AIA vice president, Southwest Region. “The joint committee is to be commended for looking at both the long- and short-term solutions for insuring against natural catastrophes facing those residents who choose to live along the Texas coast. Specifically looking at the funding mechanisms for the Texas Windstorm Insurance Association (TWIA) is a good beginning toward reducing the residual market burden on insurers,” said Bosse.
Hurricane Katrina and the other devastating 2004-05 storms focused renewed attention on the role of private sector insurers in managing natural catastrophe risk. Fortunately, despite last year’s record-breaking losses—and predictions of higher-than-average hurricane activity levels for the foreseeable future—insurers are well positioned financially to manage this risk. However, to do so effectively, insurers must have the tools to measure and reduce catastrophe risk, and the insurance regulatory system must allow rates to reflect the real costs of coastal exposure.
AIA and many other insurers believe that new government programs are no panacea for natural catastrophe risk, and can lead to inefficient allocation of capital, unfair subsidization, and increased (and unwise) building in catastrophe-prone regions. The best solution rests in improving, not displacing, the private sector’s ability to serve homeowners and businesses in the path of potential storms from Texas to Maine.
The documents submitted by AIA to the joint committee include remarks by AIA President Marc Racicot before the National Press Club on Aug. 22, regarding AIA’s natural catastrophe agenda, and an AIA white paper, “Creating Capacity in the Texas Homeowners Market: Enabling Insurers to be More Competitive by Revising TWIA’s Authorizing Statute.”
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