Carriers View Gulf States As ‘Tough Place to Do Business’

More than 100 insurance and risk management executives and industry analysts attending a Future Focus conference in Charleston, S.C. predicted that catastrophic losses will continue to escalate unless the insurance industry works with state and federal governments to enforce building codes and reform land use regulations.

William Sanders, president of Vanguard Fire and Casualty and other panelists said Florida is “a great place to live as long as the wind isn’t blowing, but potentially a tough place to do business.”

Sanders noted growth in both the number of homes in the state and their values.

“The same thing is happening in California, where earthquakes are a big risk,” he told the South Florida Business Journal. “We need to decide how we as a country are going to deal with this exposure.”

Joseph Annotti, senior vice president of public affairs for the Property Casualty Insurers Association of America, said experts predict this type of hurricane season will be the norm for the next two decades.

“Rather than sustaining more losses, he said, insurers are looking at areas such as the Gulf Coast and deciding not to do business there, or, at least, to limit the amount of business they do,” Annotti explained.

Proposals included creating a national catastrophe fund, amending the tax code to allow tax deferrals on insurance reserves and funding a government-backed reinsurance program.

“More than half the country’s population live in coastal areas,” said William Mullaney, president of personal lines for MetLife Auto & Home. “This makes mega catastrophes such as Hurricane Katrina national issues.

“Through a combination of loss mitigation efforts, state catastrophe funds modeled after the Florida Hurricane Catastrophe Fund or the California Earthquake Auth-ority, and a national catastrophic loss fund, we can develop a
comprehensive approach to addressing these risks,” Mullaney concluded.