Federal Insurance Office Seeking Comment on U.S. Catastrophe Insurance Market

Pursuant to Section 100247 of the Biggert-Waters Flood Insurance Reform Act of 2012 (“BWA”), Federal Insurance Office (“FIO”) Director Michael McRaith advised today, April 23, 2013,  that he is seeking comments and supporting information on natural catastrophes and the current state of the market for insurance for natural catastrophe perils in the United States.  To view the complete notice, click here.

Specific instructions to submit comments will be posted by the FIO in the coming days on www.Regulations.gov.

Enacted with President Obama’s signature on July 6, 2012, the BWA reauthorized the National Flood Insurance Program until September 30, 2017 and includes several reforms that could assist state and local governments looking to implement policies to adapt to sea-level rise and other flood impacts from climate change.  To access a comprehensive analysis of the BWA, click here.

The BWA, which requires a number of studies to be conducted either by the Federal Emergency Management Agency or various other federal agencies, also requires the FIO to assess the current state of the U.S. natural catastrophe insurance market.  Insurance availability, ability to mitigate risk, market approaches, financial condition of markets in high-risk regions, and the role of federal and state governments in incentivizing risk mitigation markets must be evaluated according to the law.  

In conducting the study and issuing its report, the BWA mandates that the FIO shall consult with the National Academy of Sciences, state insurance regulators, consumer organizations, representatives of the insurance and reinsurance industry, policyholders, and other organizations and experts, as appropriate.

In addition to comment on natural catastrophes and the current state of the market for U.S. natural catastrophe perils insurance, the FIO is specifically seeking input on the following considerations:

• The current condition of, as well as the outlook for the availability and affordability of insurance for natural catastrophe perils in all regions of the United States, including whether a consensus definition of a “natural catastrophe” should be established and, if so, the terms of that definition;
• The current ability of states, communities and individuals to mitigate their natural catastrophe risks, including the affordability and feasibility of such mitigation activities;
  • The current and potential future effects of land use policies and building codes on the costs of natural catastrophes in the United States;
  • The percentage of residential properties that are insured for earthquake or flood damage in high-risk geographic areas of the United States, and the reasons why many such properties lack insurance coverage;
  • The role of insurers in providing incentives for risk mitigation efforts;
• The current state of catastrophic insurance and reinsurance markets, and the current approaches in providing insurance protection to different sectors of the population of the United States;
• The current financial condition of state residual markets and catastrophe funds in high-risk regions, including the likelihood of insolvency following a natural catastrophe, the concentration of risks within such funds, the reliance on post-event assessments and state funding, and the adequacy of rates;
• The current role of the federal government, as well as state and local governments in providing incentives for feasible risk mitigation efforts and the cost of providing post-natural catastrophe aid in the absence of insurance;
• Current approaches to insuring natural catastrophe risks in the United States;
  • Current and potential future federal, state, and regional partnerships that support private, direct insurance coverage;
  • The potential privatization of flood insurance in the United States; and such other information that may be necessary or appropriate for the FIO report.

The FIO is also calling for the submission of papers containing empirical or non-empirical analyses or evaluations of natural catastrophes and the current state of the market for insurance for natural catastrophe perils in the United States.  The agency is seeks papers either recently completed or those that will be completed prior to close of the report.

Contributions are encouraged by researchers from academia, states and state agencies, business organizations, insurance trade and professional associations, research consulting firms, and other organizations and experts. Possible topics may include, but are not limited to topics that may be addressed in the Report.

Should you have any comments or questions, please contact Colodny Fass& Webb.

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