CHICAGO -- The National Association of Insurance Commissioners’ (NAIC) deliberations on catastrophe issues, including discussion about climate change and the regulation of catastrophe modelers, during the Fall Meeting in Washington D.C. Sept. 28 – Oct. 1, 2007 will be closely monitored by the Property Casualty Insurers Association of America (PCI).

At the Summer Meeting, the Property and Casualty Insurance (C) Committee decided to hold a public hearing during the Fall Meeting relating to catastrophe modeling. The hearing is intended to help educate insurance department staff on the various models and solvency tools to be certain companies have sufficient capital. The committee seeks to gather information on an appropriate regulatory framework for monitoring the activities and industry use of catastrophe risk modelers. Specifically, the committee will explore the appropriateness of the use of near-term catastrophe models for pricing property insurance.

At this meeting PCI will discuss how insurers, reinsurers, and capital markets use catastrophe risk models as a tool to assist in quantifying the expected cost of future catastrophic events. “These computer models and simulations provide an independent, objective assessment of potential loss facing a company. It is important that that these models be developed in an unregulated environment in order to ensure that they are based on the  scientific method and not manipulated to discount hurricane threats in order to support the artificial suppression of rates,” said David Kodama, director of policy analysis for PCI.

During the Fall Meeting, the Catastrophe Insurance Working Group and Climate Change and Global Warming Task Force are scheduled to meet.  Through these and other working groups the NAIC has outlined the problems that confront the nation and is working to find effective solutions.  PCI fully supports the NAIC’s interest in addressing loss mitigation, the need for strengthening building codes and developing smarter land use practices.

“However, we remain concerned with the direction of the paper entitled “A New Approach to a National Catastrophe Plan” being considered by the Catastrophe Insurance Working Group,” said Don Griffin, vice president, personal lines for PCI. “The paper was reintroduced in March of this year, based on the January 2006 version that caused concern for insurers because it required states to decide whether to establish a state or multi-state catastrophe fund, included mandatory mitigation provisions, and called for a federal reinsurance backstop.  The plan also included a mandatory “all-perils” policy, and checklist which PCI and others are opposed.  Over the course of 2006, the NAIC had modified the paper and moved away from the mandated coverages to a mandated offer and dropped the checklist.  However, they have taken a backward step with the reconsideration of this plan.”

PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association.  PCI members write over $194 billion in annual premium, 40.1 percent of the nation’s property/casualty insurance.  Member companies write 51.3 percent of the U.S. automobile insurance market, 39 percent of the homeowners market, 32.1 percent of the commercial property and liability market, and 38.7 percent of the private workers compensation market.

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© 2007 Property Casualty Insurers Association of America

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