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  • ABIR Supports Legislation Removing Red Tape That Limits Ability of Private Insurers to Write Flood Insurance

    Press Releases | 04.06.2016

    ABIR Press Release
    For Immediate Release
    Contact: Brad Kading@abir_bermuda

    ABIR Supports Legislation Removing Red Tape That Limits Ability of Private Insurers to Write Flood Insurance

    Washington, DC (April 6, 2016) – In a statement before the National Association of Insurance Commissioners’ (NAIC) Property and Casualty Committee on April 5 in New Orleans, LA, Bradley Kading, president of the Association of Bermuda Insurers and Reinsurers (ABIR) called for the NAIC to focus on six specific US National Flood Insurance reforms, as the US Congress begins to considering reauthorization legislation.  “These measures collectively would increase the purchase of flood insurance in the United States and provide consumers with more comprehensive coverage and with a choice of flood insurance providers,” Kading said. “We favor policy changes that remove regulatory red tape to allow private insurers to voluntarily write more flood insurance; and that encourage the US National Flood Insurance Program (NFIP) to continue on a necessary and essential pathway to risk based pricing that will encourage transfer of risk to private insurance markets.”

    ABIR’s recommendations on how to improve flood insurance markets:

    1. Continue work to support the Ross-Murphy bill, H.R. 2901; the NAIC’s statements in support are important to demonstrate that private insurance markets can well serve consumers under appropriate state regulation.
    2. Engage with members of the US House Financial Institutions Committee which has begun work on NFIP reauthorization legislation and is interested in advice on how to expand consumer flood insurance markets. Risk based pricing in the NFIP is critical to provide incentives for designing in resilience into construction and for supporting Mother Nature’s flood protection systems.
    3. Move from the current NFIP opaque subsidies which provide below cost insurance for people regardless of their means to ones that are transparent and focused on subsidies for low income individuals. Over time, risk based pricing will encourage risk to be moved to the private sector. At the same time some subsidies will be needed in the NFIP to protect the interest of low income consumers who need flood insurance. The NFIP is needed but over the long haul it likely is best designed as a residual market that protects people that cannot buy flood insurance in private markets.
    4. Continue along the current NFIP glide path to risk based pricing – this is essential if private sector insurance utilization is the goal. Private insurers will underwrite risk better than the NFIP. In many areas today private insurers cannot compete with the NFIP due to the continued subsidization in NFIP rates; in other areas private insurers can compete as evidenced by Wharton research, individual insurer commentary and by press reports.
    5. Purchase private reinsurance for the NFIP – this will reduce the burden on federal taxpayers which now are shouldering $23 billion in debt for the NFIP.
    6. Focus scarce federal resources on designing and building in resilience in infrastructure and creating incentives for consumers to protect themselves via pre-event insurance and risk mitigation rather than over-reliance on post event disaster aid.

    ABIR members, and other Bermuda (re)insurers, underwrite substantial amounts of catastrophe reinsurance around the world:

    1. In the UK, ABIR members and other Bermuda insurers have contributed just under 20% of the costs of the late in the year 2015 flooding.
    2. In Thailand, ABIR members provided an estimated 15% of the costs of the 2011 Thai floods.
    3. In the US, ABIR members, and other Bermuda (re)insurers are estimated to have borne 16% of the losses from Hurricane Sandy, much of this in commercial flood claims.
    4. In New Orleans in 2005, ABIR members were estimated to have paid 30% of the claims from Hurricanes Katrina, Rita, and Wilma.
    5. ABIR members will be in the mix for the UK and US reinsurance purchases anticipated by the national flood insurance programs.

    The complete ABIR statement is available here.

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    About ABIR: The Association of Bermuda Insurers and Reinsurers (ABIR) represents Bermuda’s major property and casualty insurers and reinsurers. Bermuda is the center of global expertise on underwriting for catastrophe risk transfer products and other specialty insurance and reinsurance. For more information, please visit: www.abir.bm.

     

     

    Photo Credit: Missouri Dept. of Insurance