National Association of Mutual Insurance Companies

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NAMIC Takes Stock of Issues Facing Property/Casualty Industry During August Recess

Members of Congress are taking a breather this month – allowing NAMIC’s Washington, D.C., staff to regroup and gear up for the remainder of the 2007 legislative season on Capitol Hill. Here’s a look at some of our major issues in terms of where we’ve been and what lies ahead.

Terrorism Insurance Backstop: Political leaders in both chambers of Congress have expressed a desire to extend the public/private partnership to cover terrorist events. Legislation initially introduced in the House of Representatives would force companies that offer terrorism coverage to also make available insurance for attacks by nuclear, biological, chemical, and radiological weapons – events seen as uninsurable by many experts.

NAMIC has made clear its strong opposition to the inclusion of the mandatory NBCR make-available provision.

A bill passed by the House Financial Services Committee just before the August recess, H.R. 2761, the Terrorism Risk Insurance Revision and Extension Act of 2007, took NAMIC’s concerns into consideration. It includes the following:

  • Gradually reduces the coinsurance amount carriers must pay, as the aggregate level of industry losses increases – from 15 percent to as low as zero, depending on the size of the event. NAMIC is continuing to work with lawmakers to address those situations where small- and medium-sized companies are disproportionately affected by an NBCR event.
  • Extends the program for 15 years.
  • Lowers the event trigger for insurance companies to be eligible for federal coverage from $100 million to $50 million. In addition, NAMIC supports the efforts of Rep. Paul E. Kanjorski, D-Penn., chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, to further reduce the trigger to $5 million for a second event following an initial industry terrorism loss of more than $1 billion.
  • Gives smaller companies the opportunity to seek an exemption from the NBCR make available requirement if the coverage threatens their solvency.

The McCarran-Ferguson Act. Unfounded criticism of the insurance industry resulted in critics threatening to repeal or alter the antitrust exemption. Legislation introduced in both chambers, S. 618 and H.R. 1081, was the subject of congressional hearings during the year.

In March, NAMIC led an effort to contact members of Congress with its concerns. Ten industry trade organizations signed on to a letter that was delivered to all members of Congress.

So far, no congressional panel has approved the legislation. Despite the good news, though, the threats persist. NAMIC will vigilantly rebuff attempts to change or eliminate the antitrust exemption, which allows and fosters competition in the market.

Flood Reform: The devastating 2005 hurricane season put the nation’s flood insurance program in jeopardy. The National Flood Reform Program is nearly $20 billion in debt. In addition, the program must pay interest of approximately $800 million.

NAMIC has lobbied hard for reforms to this program. Legislation introduced shortly before the August recess includes many positive elements, although it also includes a provision troubling to the property/casualty industry.

On the plus side, H.R. 3121, the Flood Insurance Reform and Modernization Act of 2007, would:

  • Increase the NFIP’s borrowing authority to enable it to pay claims from the 2005 hurricane season.
  • Provide funding for mitigation programs.
  • Require and fund updates to the nation’s flood maps to more accurately identify areas vulnerable to flooding.
  • Create incentives to encourage more homeowners in designated flood zones to secure flood insurance coverage.

However, the legislation also would add wind coverage to the NFIP, something NAMIC strongly opposes. “Adding windstorm coverage to the debt-ridden NFIP will only add to taxpayers’ liability,” said Justin Roth, NAMIC’s senior federal affairs director.

Roth said the private market is more appropriate for wind coverage. NAMIC will continue to lobby for a stronger NFIP without the inclusion of wind coverage.

Direct questions to NAMIC Senior Vice President of Government Affairs Carl Parks.

Posted: Tuesday, August 14, 2007 12:00:00 AM. Modified: Tuesday, August 14, 2007 9:35:37 AM.

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