National Association of Professional Insurance Agents
400 North Washington Street, Alexandria, Virginia 22314
General Phone: 1-703-836-9340 and FAX: 1-703-836-1279
General E-mail: piaweb@pianet.org & website: www.pianet.com
July 22, 2009
Mr. Barney Frank
Chair, Committee on Financial Services
Dear Chairman Frank:
On behalf of the National Association of Professional Insurance Agents (PIA) and the
thousands of agency owners that we represent, thank you for your leadership on the
critical issue of natural disaster preparedness and recovery. We appreciate the attention
that you and Representative Klein have shown to natural disaster preparedness. Your
dedication to this issue already shows significant improvements in the form of stronger
building codes and enforcement throughout the country. These efforts save lives and
property and that is why PIA has long been an advocate of such measures. We look
forward to continuing to work with Congress to ensure healthy markets for consumers
and better coordination among state and federal authorities.
Our members support a coordinated natural disaster catastrophe program that covers
commercial and residential property and does not compete with the private sector’s
capacity to provide insurance. Our members also think that Insurers should be allowed to
price policies according to risk. This will discourage building in environmentally
sensitive areas while placing the risk burden on the private market instead of taxpayers.
Any catastrophe program should be designed as a public-private collaborative effort,
involving participation by states and local governments. The Federal Government is the
only entity capable of organizing emergency response coordination regionally, or
nationally, and therefore we support legislation that would enhance the governments’
capability to prepare for and respond to such disasters.
Comprehensive natural disaster legislation cannot be fully addressed by combining it
with other forms of catastrophic events, such as flood insurance or terrorism insurance.
We would like to see the continued emphasis on natural disaster preparedness to be
separate from the federal flood program and the terrorism insurance programs.
PIA supports the availability, affordability and stability of property insurance in
catastrophe prone areas for the economic viability of local communities. It is imperative
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that we have plans in place to prevent extensive damage from natural catastrophes.
However, we must also plan for the aftermath of the next big disaster that is sure to come.
Natural disasters affect every area of the United States.
Although hurricane damage has been at the forefront of the discussion on natural
disasters, the reality is that severe damage can be caused by a myriad of disasters. This is
a nationwide concern, not a regional problem and it is integral to our efforts to focus on
all potential disasters.
We regularly work with our state regulators and legislators on these issues to develop
uniform response measures. The National Association of Insurance Commissioners
(NAIC) and the National Conference of Insurance Legislators (NCOIL) have been
discussing comprehensive national plans for managing natural catastrophes for several
years. Having worked with numerous other interested parties including insurance
companies, environmental organizations and consumer groups, we believe there is
consensus around a few main points that have been PIA policy for several years.
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Build Smart: Properties in coastal areas and other high-hazard areas should be
built, replaced or repaired according to the most modern building standards and
codes reflecting exposure to natural disasters and effective loss-reduction
measures.
Encourage Safety: Government incentives should promote risk-avoidance and
proactive mitigation measures to protect the public from a broad range of natural
disasters.
Use Nature: Protect ecosystems that provide natural buffers to storms; renewed
efforts should be made to preserve coastal areas consistent with effective state and
federal laws, using uniform, objective standards.
Insure Based On Risk: Private and public property insurance premiums should
be established on the basis of risk exposure, including catastrophic risk, subject to
state law that risk premiums should be neither excessive or inadequate.
Assume Responsibility: Responsibility for state insurance and reinsurance
programs that pool natural disaster risks should remain with those states which
have established programs, rather than shifting the financing to the Federal
Government through such means as Federal loans or reinsurance.
Target Government Assistance: Programs that should focus on people and not
insurance by:
 Extending tax credits, loans and grants for measures designed to protect the
property from natural disasters – rather than for programs designed to support
artificially low insurance rates.
 Providing means-based assistance, focused on low and fixed income residents
– not high-income individuals with expensive beachfront or vacation homes.
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 Helping existing property in coastal areas and other high-risk areas -- Federal
assistance should not subsidize new property development in coastal areas
vulnerable to catastrophic storms, or other high-risk areas.
The private insurance industry has insured wind and earthquake risks, including the
unprecedented losses of the 2005 hurricane season. Although reinsurers paid
approximately one-half of all the losses from Hurricanes Katrina, Rita and Wilma, the
capital markets greatly enhanced reinsurance catastrophe capacity following these
catastrophes. History proves the private sector has insured catastrophic natural disasters
and, if market dynamics are allowed to work, has plentiful capacity to do so in the future.
Insurers pay the vast majority of homeowners’ catastrophe losses. The bulk of
government disaster assistance from FEMA goes to public infrastructure and local
governments, not individuals. A comparison of FEMA and private market insurance
payments for U.S. hurricanes from 1994 through 2006 shows insurers paid out more than
$100 billion while FEMA paid a little more than $33.1 billion in relief to public entities
and $16.3 billion to individuals.
A number of states have implemented a variety of proactive programs to address their
unique natural catastrophe exposures and assist their citizens. Florida and South Carolina
created programs to provide financial grants to homeowners helping them retrofit their
properties to make them less vulnerable to hurricane damage; during 2007 Louisiana,
Mississippi and Connecticut adopted insurance premium discounts for consumers that
make structural improvements to minimize damage from natural disasters. Government
proposals that transfer risk from insurers to taxpayers won’t reduce the risk or cost, but it
will diminish the private market and encourage further development in hazardous areas
leading to increased risk and cost in the future.
For these reasons we support Chairman Thompson’s mitigation bills; H.R. 2592, the Safe
Building Code Incentive Act; H.R. 3026, the Hazard Mitigation for All Act; and H.R.
3027, the Pre-disaster Hazard Mitigation Enhancement Program Act. We support the
mitigation efforts of H.R. 2555, the Homeowner’s Defense Act, but we are concerned
that asking the Federal Government to enter into the reinsurance market when there is
ample capital in the private market may exacerbate the problem by unintentionally
subsidizing further development in disaster prone areas.
We value our relationship with your office and appreciate your willingness to work with
us. The diligent manner in which you approach our issues of concern does not go
unnoticed.
Sincerely,
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Brian Marino
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Chair, PIA Natural Catastrophe Working Group
CC: PIA Executive Committee
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