Insurers Urge Regulatory Modernization, Study of Cat Risk

In a speechbefore the American Legislative Exchange Council’s (ALEC) States & Nation Policy Summit, Property Casualty Insurers Association of America President and CEO Ernst Csiszar urged state legislators around the country to support regulatory modernization legislation efforts and work to develop ways to more effectively insure against catastrophic risk.

“Insurance remains the lone industry in the United States subject to price controls,” Csiszar told the audience. “The regulatory system is going to break, and we need to fix it before it does.”

Csiszar told the conference to seriously consider the benefits of legislation like the State Modernization and Regulatory Transparency Act proposal that has been the subject of several hearings in the House Financial Services Committee. That proposal, Csiszar said, “Would continue to give states regulatory authority, but would tweak it with limited federal intervention that would create more uniformity, efficiency, and competition that will benefit consumers.”

Csiszar also discussed the effects of hurricanes Katrina, Rita, and Wilma and the future effect they will have on the insurance industry. Calling Katrina a “seminal event” in the insurance industry, Csiszar said that insurers are going to need to take a hard look at how “mega-catastrophes” are handled.

“Fifty-four percent of all Americans now live in coastal counties,” said Csiszar. “Over the past thirty years coastal populations have grown by forty-one million, much faster than the country as a whole. By the year 2025, nearly seventy-five percent of all Americans are expected to live in coastal counties. As a result, the nation faces growing exposure to significant loss from these perils.”

Csiszar also discussed the need to find a balance between free markets and government intervention. “Clearly a one size fits all approach to mega-catastrophes will not work. You have the Florida Cat fund which cannot sell policies fast enough versus the California Earthquake Authority that can’t sell any policies at all. Undoubtedly this issue will require a great deal of study to be effective.”

Source: Property Casualty Insurers Association of America