A poll of nearly 600 industry participants conducted by A.M. Best found that most believe the private insurance market would be stressed to handle events causing more than $100 billion in insured losses.

The poll of nearly 600 industry participants found 38 percent believe a $100 billion natural catastrophe would be too large for private insurers and reinsurers to handle without government support, while 23 percent identified lower thresholds. Just over 10 percent believed the industry could handle up to $150 billion events and 29 percent said the private market could absorb events of $200 billion or greater.

More than half of all those polled — 56 percent — believe government entities are too involved in both setting rates for coverage and in taking on insurable risks through catastrophe funds and residual market mechanisms. About 28 percent believed state-sponsored cat funds were an appropriate government response for policyholders who no longer could afford their homeowners premiums, but only 12.5 percent said the same of extensive rate regulation and just 9.2 percent would support financial assistance to lower-income policyholders to help them pay their premiums. In contrast, about 62 percent of respondents said they believed high rates reflect high risk, and those who could not afford such risks should move elsewhere.

Congress and the industry remain divided. The Homeowners Defense Act (H.R. 3355) passed the House a year ago but has not seen action in the Senate. There is also no consensus within the insurance industry. In recent months, Nationwide Mutual, Hartford Financial Services and Travelers have all made their own catastrophe proposals.

Industry Sees Need for Cat Help (BestWeek 9/29/08)

September 30, 2008