Associations Say Protection Needed for Hurricanes

Hurricane Gustav and Tropical Storm Hanna have already made landfall in the U.S., and Ike and Josephine are looming.

While global reinsurers stand ready to promptly pay claims for the losses incurred by these natural catastrophes and to provide substantial capacity to meet U.S. insurer needs, public policymakers should make it their immediate priority to protect people and property from damage inflicted by future catastrophic events, according to a pair of associations.

"The technology and expertise exists to inexpensively retrofit homes to 'storm proof' them. Legislators need to act now to help people who live in areas vulnerable to catastrophes be proactive in protecting their property by storm proofing their homes," said the Reinsurance Association of America (RAA) and the Association of Bermuda Insurers and Reinsurers (ABIR). Members and affiliates of the RAA and ABIR supply the overwhelming majority of the reinsurance written to protect U.S. insurers from catastrophic natural disaster losses.

"Research shows that if all the homes in Florida were built to Florida's current building code, the average annual insured modeled losses would be at least 50% lower than they are today. Lower insurance claims will inevitably lead to lower insurance costs in the future, and the way to get there is through effective loss prevention measures," said ABIR's President Brad Kading.

"We can't waive a magic wand and 'storm proof' all homes, but we can make a great deal of progress. Programs like My Safe Florida Home and information available from the Federal Alliance for Safe Homes (FLASH) and the Institute for Business and Home Safety (IBHS) provide consumers with information about how to protect their property -- with roof tie downs, storm shutters or redesigned garage doors. A lot can be done to retrofit existing Florida homes in a way that prevents excessive damage from storms and protects the families who live there," said RAA's President Frank Nutter.

"Global property reinsurers paid 47% of the Hurricane Katrina, Rita and Wilma damage in 2005," continued Kading. "Reinsurance spreads the cost of hurricane catastrophes to global shareholders rather than confining those costs within the boundaries of the southeastern U.S. It's ultimately less costly for consumers (taxpayers) to pay the cost of insurance today than to have to pay hurricane taxes for bonds and interest that will take 10 to 30 years to pay off."

"Reinsurance markets are robust and can support U.S. property insurance markets. As the experience of 2004 and 2005 shows, investor capital is readily available to meet the needs of the U.S. insurance and reinsurance markets. While paying tens of billions in claims, reinsurers remained financially strong and committed to supplying reinsurance to the unique risks in Hurricane Alley," Nutter noted.

To that end, the RAA and ABIR support:

1. Continued implementation of Florida's My Safe Florida Home Program

2. Creation of new statewide wind resistant building codes in states where they don't exist and enforcement of those building codes.

3. South Carolina's coastal insurance program designed to give consumers incentives to retrofit homes to prevent future storm losses.

4. Federal legislation introduced by Sen. Chris Dodd (D-CT), Chair of the Senate Banking Committee, and Rep. Bennie Thompson (D-MS), Chair of the US House Homeland Security Committee, designed to promote hazard mitigation with tax incentives and help low income consumers pay for the cost of property insurance.

5. Pending House and Senate legislation designed to assist state and local governments train building code enforcement staff.

6. Elimination of hidden insurance subsidies which deter the investment of private capital and camouflage the cost of hurricanes to the US.

7. The work of the Americans for Smart Natural Catastrophe Policy (www.smartnatcat.org) which promotes hazard mitigation, land conservation and consumer assistance programs designed to protect people and property from storms.