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Two voices in the insurance industry are making themselves heard in the debate over how to better prepare for natural disasters, for the industry's and nation's well-being.

The argument between them heated up earlier this year when the American Insurance Association released its national catastrophe plan, which another lobbying group dismissed as "a car without seatbelts or airbags," according to reports.

The AIA, a trade group that includes about 400 P/C companies that write more than $120 billion annually in premiums, first released its "holistic" Natural Catastrophe Agenda this summer. It is founded in the belief that the insurance industry has the tools and the capital to handle catastrophes on its own, without government involvement.

"We believe that it is much better to invest private sector and government dollars in cost-effective, pre-event loss prevention," said Marc Raciot, AIA president, in a speech at the National Press Club in August.

The best way to proceed, the AIA insists, is to implement better on-the-ground measures such as stronger building codes and more precise disaster planning, along with financial measures such risk-based property pricing, tax reforms to allow insurers to build up catastrophe reserves, and corrections to the government's National Flood Insurance Proagrm.

But the lobbying group called ProtectingAmerica.org, a coalition of public, private and nonprofit local and national entities, has put its weight behind H.R. 4366, a bill sponsored by Rep. Ginny Brown-Waite, R-Fla.

Included in this lobbying group are the large property insurers Allstate Insurance Co. and State Farm Insurance Co.

One of the foundations of Brown-Waite's bill would be to set up catastrophe funds at the state and local level funded by a portion of property premiums linked to a specific CAT risk. The funds would be allowed to grow tax-free.

October 15, 2006

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