You are here:HomeIssuesNatural Disaster2005PIA National Board Endorses Creation of Public-Private Natural Catastrophe Fund

PIA National Board Endorses Creation of Public-Private Natural Catastrophe Fund

Portland, Ore., September 11, 2005 - The board of directors of the National Association of Professional Insurance Agents (PIA) has voted unanimously to...
September 11, 2005

Calls on Congress to Adopt Coordinated Plan That Creates Backstop

Portland, Ore., September 11, 2005  - The board of directors of the National Association of Professional Insurance Agents (PIA) has voted unanimously to call on Congress to adopt and fund a coordinated natural disaster catastrophe program. The action was taken during the association's fall meeting in Portland, Oregon held on September 11, 2005.

"The widespread devastation caused by Hurricane Katrina serves as an awesome reminder that neither one state nor a regional grouping of states can fund or support a catastrophe reserve fund," said PIA National Senior Vice President Patricia A. Borowski. "A national program for natural disasters has been discussed for many years. The time to create one is now."

PIA said such a program should be designed as a public-private collaborative effort. It should include prorated participation by states and local governments, together with the all sectors of the financial services industry, in the creation of a backstop for natural catastrophes to provide a financial reserve backstop for insurance carriers suddenly overwhelmed by the onslaught of extraordinary claims-payouts resulting from natural disasters.

"The goal of such a program is to provide immediate financial stability to markets in the immediate aftermath of natural disasters; to allow continued market stability; and to provide sufficient time to build back market capacity," Borowski said, adding that the program should also include funding of loss mitigation projects, especially in regard to protective infrastructures such as levies, dikes and retrofits.

PIA also recommended that the program should include a provision for the creation of tax-advantaged local or regional enterprise zones in areas affected by natural disasters, especially where recovery is expected to be long-term and affects broad geographic areas.

In addition to calling for the creation of a natural disaster catastrophe program, PIA National, in coordination with PIA of Louisiana, PIA of Mississippi and PIA of Alabama, has proposed a series of suggested directives that should be issued by departments of insurance (DOIs) in the three states, in the immediate aftermath of Hurricane Katrina.

These include directives involving suspension of insurance premium payments for all affected insureds; partial or full suspension of account current insurance premium payments from directly affected insurance producers; suspension of interest payments during the time insurance premium and/or account current payments are suspended; and, as quickly as possible, a request that that state Departments of Insurance, the Federal Emergency Management Agency (FEMA) and insurers coordinate to declare specific geographical areas as "total losses," especially for private homes, allowing total claims payouts to proceed.

The PIA recommendations were made to insurance regulators and companies that attended an emergency summit meeting September 7 in Atlanta called by Louisiana Insurance Commissioner Robert Wooley. PIA of Louisiana Executive Vice President Jody Boudreaux represented PIA at the meeting and made additional suggestions specific to the Louisiana DOI's Draft of Emergency Orders.

"PIA of Louisiana hopes the DOI will be able to act quickly on these orders, and provide at least a 90-day effective period with an option for renewal for these initial set of orders," said Boudreaux. "Right now, agents are still dealing with responding to the immediate needs of their clients who are still in crisis. They need a reasonable amount of time to focus on these immediate needs."

The proposed directives discussed at the September 7 summit are expected to be issued this week.

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA will celebrate its 75th anniversary in 2006. Visit PIA at www.PIANET.com