Allstate, State Farm Renew Push for Federal Cat Reinsurance Program
ProtectingAmerica.org has begun lobbying Congress yet again in its half-decade long push for a federal reinsurance program to backstop states and carriers from mounting natural catastrophe losses and rising private reinsurance costs.
The group — backed by Allstate, State Farm as well as several other non-insurers like AT&T – are shopping draft legislation to possible congressional sponsors with the goal of creating a U.S. national catastrophe fund.
Arguing that although the first six months of 2011 saw $70 billion in global natural catastrophe losses (an all-time record), “the Big One has yet to strike,” according to a white paper being distributed by the group to lawmakers.
News of the white paper was first reported by Poltico.com.
“Private insurers and reinsurers are not waiting around for [the “Big One”] to occur – they have seen the future, and have systematically been reducing their relative risk exposure to catastrophic events,” the report says.
The proposed “Taxpayer Protection Act of 2011” would create a commission for structuring and implementing the fund, which would offer varying annual coverage amounts that would be no greater “than the difference between the available cash in a Plan and the actuarially modeled level of losses it would sustain in a 1-600 year event.”
Capital would come from premiums collected by stare participating plans, and any excess losses would be backed by bonds that would then later be repaid by surcharge.
An earlier version of the bill, offered last year was, would come at a $1.2 billion taxpayer cost, according to the Congressional Budget Office. However, the cost would be eliminated through a self-funding mechanism offered in the new bill, the white paper argues.
“Not all risk are amenable to private insurance……states will always retain the position of insurer of last resort for extremely large loss exposures where private insurance capacity is insufficient,” the white paper quotes global reinsurance Swiss Re as saying.
Ironically, Swiss Re is a financial backer of SmartSafer.org, a coalition of private insurers opposing a national disaster fund that put out a YouTube video last year on the bill.
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