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NAMIC President/CEO Testifies Before House Subcommittee on Stabilizing Insurance Markets for Coastal Consumers

WASHINGTON (Sept. 13, 2006)—Congress can play a constructive role in assisting the private market to ensure that the nation’s homeowners and insurers are prepared for the next major natural catastrophe, said a National Association of Mutual Insurance Companies (NAMIC) witness in testimony before a House Financial Services Subcommittee today.

Chuck Chamness, president/CEO of NAMIC, testified before the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises hearing on “Stablizing Insurance Markets for Coastal Consumers.”

In his opening remarks, Chamness thanked Subcommittee Chairman Richard Baker, R-La., and members of the committee for making a serious effort to understand the nature of catastrophic risk and the role that the insurance industry and the federal government can and should play to better prepare for and manage future large-scale natural disasters.

“I have good news and bad news,” Chamness said. “The good news is that despite the enormous challenges property insurers have faced in the wake of last year’s hurricanes, I can report that almost all claims have been paid, take-up rates for the flood insurance program have increased significantly, the people in the affected regions are rebuilding at record rates, and a recent study found that nearly 90 percent of those who filed claims in Mississippi and Louisiana are satisfied with their insurance company.

“As we all know, 2005 was one of the worst years for natural disasters in American history. According to the latest estimates, Hurricane Katrina alone caused approximately $41 billion in insured losses arising from nearly two million claims. Yet one year later, roughly 95 percent of homeowners claims and 99 percent of auto insurance claims have been settled.

According to Chamness’s testimony, while residential building permits declined nationwide, the two states hit hardest by Katrina – Louisiana and Mississippi – saw building permits increase significantly. Even more encouraging is that despite the magnitude of insurers’ losses in 2005, their prudent risk management strategies have enabled them to stand ready to respond to future catastrophes. However, the bad news is that most forecasters predict that the 2005 storms cycle will be the norm for the next several years, said Chamness.

"The future stability of coastal markets will be threatened by the increase in storms, state suppression of rates, and litigation that seeks to rewrite regulator-approved insurance contracts that have been in force for decades,” Chamness explained.

The havoc wreaked by the 2005 Gulf Coast hurricanes has raised important questions about how Americans should prepare for and respond to natural disasters in the future. The likelihood of more frequent and severe natural disasters in the near term, combined with the continuing population growth and development in areas vulnerable to natural disasters, pose significant challenges for government policymakers, insurers, realtors, home builders, mortgage lenders and property owners.

In December 2005, NAMIC formed a special task force to identify and analyze the critical issues that NAMIC believed policymakers should consider as they move forward. After months of deliberations, the task force formulated four general principles that will serve to guide NAMIC members and staff as the natural disaster debate evolves.

Chamness cited these principles:

  • Market freedom and competitive pricing will lead to innovation in developing solutions to problems relating to disaster insurance and mitigation.
  • Competitive pricing and risk-based underwriting are essential to developing and maintaining a viable disaster insurance market.
  • Mitigation must be an indispensable aspect of any disaster risk management and insurance initiatives.
  • The National Flood Insurance Program (NFIP) should be maintained but must be reformed.

“In conclusion,” stated Chamness, “NAMIC realizes that those who live and do business in catastrophe-prone areas will face serious challenges in the years ahead.

“We believe that the most effective mechanism for addressing these challenges is a private insurance market whose defining characteristics are open competition and pricing freedom.”

Chamness ended his testimony by stating that NAMIC looks forward to working with Rep. Baker and the Congress to help consumers in coastal areas meet the challenges involved in effectively managing the risk of natural catastrophes.

Chamness’ testimony can be accessed at NAMIC Online.


For further information, contact
Georgiann Howell
(202) 628-1558 Tel
(202) 628-1601 Fax
ghowell@namic.org

For further information, contact
Justin Roth
(202) 628-1558 Tel
(202) 628-1601 Fax
jroth@namic.org

Posted: Wednesday, September 13, 2006 12:00:00 AM. Modified: Friday, September 22, 2006 10:23:07 AM.

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