Catastrophe cover in Florida has been a hot topic in the last few days. First the arrival of tropical storm Fay set the press alight with talk of the lack of cover available and the high property insurance premiums customers pay in Florida state, and then yesterday it became a Presidential campaign issue as John McCain voiced his opinion. The National Underwriter has an interesting piece on this.
Republican presidential candidate McCain voiced his dislike of a bill proposing a national risk pool for catastrophes. He said he was not prepared to endorse a national risk pool as the way to bring down homeowners insurance costs and suggested that states should form regional alliances to protect themselves.
This could be the death knell for the proposed “Homeowners Defense Act of 2007,” H.R. 3355 raised in the house by Representative Tim Mahoney. This bill proposes to allow states to pool their catastrophe risks and then transfer them through the sale of catastrophe bonds or purchase of reinsurance. The bill has passed the House but continues to face opposition in the Senate.
Barack Obama on the other hand has come out in favour of the bill which could make this an issue that gets debated at the highest levels.
What does this mean for the risk transfer market? Well if the bill gets through and states begin to access the private risk and reinsurance markets then it could mean increased business for all involved so it’s definitely an issue worth keeping an eye on.