Insurers, Agents Urge Coastal Wind Policy from Texas to Maine

Travelers, Nationwide Mutual and two leading national insurance producer organizations are supporting a plan they say will make private windstorm insurance more affordable and available in coastal areas.

Federal legislation would be required to enact the outlined concept, which includes a federally-regulated uniform windstorm coverage for coastal states that would be priced using actuarially sound rates and a government program to provide insurers with less expensive reinsurance for catastrophes.

Jay Fishman, Travelers chairman and chief executive officer, said the supporters are committed to finding a private market solution to the coastal insurance challenges.

“The comprehensive concept we are offering reflects input and ideas from across the industry, and is based on four pillars that, taken together, focus on facilitating the availability and affordability of private insurance for hurricane and tropical storm wind coverage along the Gulf and Atlantic coasts,” Fishman said.

Also supporting the “Four Pillars” principles are Nationwide Insurance, the Independent Insurance Agents & Brokers of America and The Council of Insurance Agents and Brokers.

Four Pillars

The four pillars of the wind policy proposal are:

• A stable and consistent regulatory environment, with a uniform set of rules applied to named wind coverage for coastal zones from Texas to Maine. This portion of the homeowner policy would be regulated by an independent federal body, with the remainder of the policy still regulated by the states.
• Transparency in calculating insurance premiums, with risk-based, actuarially sound rates using approved standards and wind risk models, and a rating calculation mechanism to be applied if models and actual experience become misaligned over time.
• Federal reinsurance mechanism for extreme events (such as hurricanes causing losses several times greater than those arising out of Hurricane Katrina), with the reinsurance made available to insurers at cost so there would be no taxpayer subsidy, and the savings passed directly to customers.
• Encouraging stronger homes through federal guidelines for appropriate building codes and land use planning, with incentives for state and local adoption, plus enhanced construction technology and meaningful premium credits for customers who make their homes less vulnerable to wind damage.

Mississippi Gov. Haley Barbour said he is encouraged by the principles outlined with the four pillars.

“With the projections of risk from future hurricanes, I’m committed to working with my fellow governors, Congress and others to find solutions to the current insurance market issues. We should not wait for the next major storm before solving the substantial challenges of coastal insurance availability and affordability,” Barbour said.