Washington, D.C. – America needs a public-private partnership to protect families from a devastating, massive hurricane or earthquake, the head of a coalition that includes insurers said in testimony this week before Congress. Such catastrophes have dulled the industry’s appetite for insuring against such events, said another witness, a representative of an agents’ and brokers’ association.

“Catastrophe protection and preparation is a nationwide priority that must be addressed immediately--before the next catastrophe strikes,” Robert W. Porter, executive director of ProtectingAmerica.org., told members of the House Financial Services Subcommittee on Housing and Community Opportunity.

Andrew Valdivia, a board member of the Alexandria, Va.-based Independent Insurance Agents & Brokers of America (the Big “I”) and president of White and Co. Insurance Inc., Santa Monica, Calif., told legislators that the lack of enthusiasm for disaster coverage has spread from the homeowners’ market to commercial insurance.

Porter testified that planning for potential catastrophes requires cooperation between the private sector and the government as well as coordination between the states and the federal government. He advocates establishing catastrophe funds in high-risk states and paying for them with mandatory contributions from private insurers. The funds would stand as backstops to the private insurance, he said, making homeowners insurance available and affordable for once-in-a-century catastrophes.

Risk experts and modelers have demonstrated that 57% of Americans reside in areas prone to earthquakes, hurricanes or other disasters, Porter said. Twenty states, including Hawaii and every state that borders the Atlantic Ocean and Gulf of Mexico, face the threat of hurricanes every year, he said.

The largest earthquake ever to rock the continental United States emanated from New Madrid, Mo., in 1811 and affected an area from Mississippi to Michigan and from Pennsylvania to Nebraska, noted.
Since 1900, 11 hurricanes have made direct hits on New England--six of them on the New York coastline. The “Long Island Express,” a hurricane that struck in 1939, made landfall in Long Island and raced through Connecticut, Rhode Island and Massachusetts, killing 700 people and leaving 63,000 homeless. If a similar storm struck today, damages would exceed $100 billion, according to risk modelers, Porter said.

That kind of risk has convinced the Big “I” that any discussion of coverage for natural disasters should begin with the admission that there is problem, Valdivia said.

 “It is our experience that private market coverage is scarcely available at any rate in some areas,” said Valdivia. “This is fast becoming an availability problem rather than an affordability problem.”

Sources: ProtectingAmerica.org and The Independent Insurance Agents & Brokers of America

Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access