Posted on 01 May 2013 by Neilson
The Federal Insurance Office is seeking public comment for a report on the state of natural catastrophe insurance in the United States.
Under recently enacted legislation that extended the National Flood Insurance Program through 2017, FIO is required to publish a report on the market for private natural catastrophe insurance by July 6. Comments are due by June 23.
FIO has requested that comments focus on the availability and affordability of insurance for natural catastrophe perils; whether an official definition for "natural catastrophe" should be established; the ability of states, communities, and individuals to mitigate natural catastrophe risks; and current approaches to insuring natural catastrophe risks in the United States.
The office is also interested in the current state of catastrophic insurance and reinsurance markets, as well as the financial condition of residual markets and catastrophe funds in high-risk regions.
The report on natural catastrophe insurance is scheduled for publication during the 2013 hurricane season, which begins on June 1. Last year's hurricane season brought Tropical Storm Sandy, which caused an estimated $75 billion in economic damage, making it the second costliest storm on record.
Floods set off by Sandy added to the NFIP's financial instability. Prior to Sandy, the NFIP was carrying roughly $18 billion in debt, a level that lawmakers and industry experts already considered to be unsustainable. Flooding caused by Sandy is expected to add between $12 billion and $15 billion to the NFIP's existing debt, according to a recent report by the Congressional Research Service.
In January, Congress was forced to raise the NFIP's borrowing authority by $9.7 billion to ensure claims stemming from Sandy would continue to be paid.
Congress has faced renewed calls to privatize the NFIP as lawmakers work to cut the federal budget. Getting the federal government out of the flood insurance business would strengthen the program going forward, supporters of the idea have argued.
But industry observers said supporters of a private flood insurance market have provided few details about how the NFIP's structural problems would be addressed, including how it sets rates.