Needham, Mass. - In the wake of 2005--the worst year on record for insured catastrophe damage in the United States with losses estimated at $56.8 billion--the federal government, insurance carriers, and the general public are coming to a point of convergence about the need to rethink catastrophe management beyond the much publicized issues around hurricanes, according to new research from TowerGroup.In a report titled "Property and Casualty Insurance: Convergence in Catastrophe," the research and advisory firm finds that without a concerted effort by all parties to support a holistic solution to catastrophe management, the dire predictions of insolvency in the insurance sector and general economic upheaval across the United States may come to fruition.
"A workable solution for containing loss requires the federal government, insurance carriers, and the general public to do their part to help mitigate risk--each focusing on areas they can reasonably impact," says Karen Pauli, senior analyst in TowerGroup's insurance research practice. "The federal government should enact meaningful laws, the insurance industry should develop supporting products, and members of the general public should become more proactive in protecting their property. It will take all three of these interested parties working in concert to effect the long-term change needed to reduce the risk posed by today's catastrophe landscape."
Highlights of the research include:
- The insurance industry and other concerned groups assert that the National Flood Insurance Plan needs a major overhaul. TowerGroup believes that by overhauling the program to reflect current real estate values, as well as to eliminate subsidies for individuals whose properties are repeatedly damaged by catastrophes, the plan can provide more support to those hit hardest.
- By developing new products and better educating their consumers, TowerGroup believes the insurance industry can play a larger role in improving the current response to catastrophe risk and changing the unsafe activities of policyholders.
- In addition to new approaches from the insurance industry and federal, state and local governments, TowerGroup notes that the general public must also take increased responsibility for reducing the financial impact of catastrophes, including understanding the dollars-and-cents consequences of choosing to live in areas subject to repeated catastrophes.
- As a matter of public policy, the time may be approaching to call a halt to the rapid and concentrated development in catastrophe zones.
"The federal government needs to take action with effective laws and enforcement to ensure that strict catastrophe-related building codes are in place in all states. Robust tax benefits must be instituted so that insurance carriers and consumers will take steps to insulate themselves from the extreme impact of catastrophes," says Pauli. "Solutions like these are not easy to implement, but the catastrophe impact of the past several years requires new thinking. Now is not the time for the same old resolutions."
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