The full membership of the National Association of Insurance Commissioners approved a white paper on natural catastrophe risks. The paper was four years in development and went through 15 re-writes.

The white paper does not recommend a single approach to natural catastrophes because members involved in drafting concluded they would be unable to agree on a single, unified approach the issue. Therefore, the white paper reflects “a variety of approaches” backed by state regulators, according to Illinois Insurance Director Michael McRaith, chairman of the NAIC’s Property and Casualty Committee.

Points of consensus include: that there is potential for the United States to experience a “mega-disaster”; that a national plan should promote personal responsibility among policyholders; that a national plan should support “reasonable” building codes, land-use development plans and other mitigation tools; that a national plan should maximize the risk-bearing capacity of the private markets; and that a national plan should provide “quantifiable risk management” by the federal government. Press reports say disagreements were particularly strong between coastal and inland states, which are concerned that money from safer areas will go to hurricane-prone states.

“My first responsibility is to South Dakota consumers, obviously, and what they have to pay for and what they subsidize,” South Dakota Insurance Commissioner Merle Scheiber, the lone vote against the paper, said in an interview with the New York Times. “I don’t feel they should be subsidizing coastal exposure.”

NAIC Adopts Nat Cat Paper (New York Times 9/24/09)

September 29, 2009