Learning Center
Plans & pricing Sign in
Sign Out

Slide 1 - ASSAL


  • pg 1
									Slide                                                                                            Good day. I want to express to you my
  1                    Large Scale Catastrophes
                       Large Scale Catastrophes                                                  warmest greetings on behalf of the
                                                                                                 jurisdictions of the NAIC …
                                                                                                 I salute ASSAL for its hard work in
                  National Association                                                           putting together this program, which
              of Insurance Commissioners                                                         will cover a variety of catastrophe-
                                                                                                 related subjects.
                          NAIC President Walter A. Bell                                          I look forward the time we will spend
                 Commissioner, Alabama Department of Insurance
                                                                                                 here today, and throughout the week. I
                                                                                                 hope it will be beneficial to you. I am
                                                                                                 sure it will be to me.
        May 9, 2007
                                                          making progress . . . together

Slide                                                                                            Today, I want to give you a flavor of
  2                        Topics of Discussion
                                                                                                 what is happening in the United States,
                                                                                                 and in my home state of Alabama, in
                                                                                                 particular. There is a lot of attention
                                                                                                 focused on insurance … particularly
                           What is the NAIC doing?                                               insurance of catastrophic events. This
                                                                                                 decade has seen incredible activity in
                           What is Alabama doing?                                                this area.
                                                                                                 First with September 11, 2001. In
                                                                                                 September 2001, I was living and
                                                                                                 working in New York City. I assure it
                                                         making progress . . . together          was a day I will never forget. Since
                                                                                                 then, we had the hurricanes of 2004
                                                                                                 and 2005.
                                                                                                 Crises have not been limited to the
                                                                                                 United States. The Indonesia tsunami
                                                                                                 stands as evidence to that.
                                                                                                 All of these things have shaped the
                                                                                                 marketplace for property insurance,
                                                                                                 and more importantly, the reinsurance
                                                                                                 market place.

Slide                                                                                            Here’s a good snapshot of the United
  3          Relative Size of the U.S. Insurance Market
             Relative Size of the U.S. Insurance Market                                          States insurance market
          • The United States market is, at $1.2 trillion,
                     the largest in the world

           • California, New York, Florida, Texas, and
          Pennsylvania are all larger markets than the
                    10th largest market, Spain

        • 7 other states are larger than the 16th largest
                      market, South Africa.

                                                                making progress . . . together
Slide                                                                            One of the main issues at the forefront
  4                     NAIC activities
                        NAIC activities                                          of the insurance debate in the U.S. is
                                                                                 how to deal with catastrophic events.
              • Catastrophe study commission
                                                                                 This is a flavor of what is going on and
             recommendation to U.S. Congress
                                                                                 how the NAIC feels about it.
          •Testimony to congressional committees                                 (LIST)
                                                                                 We’ll spend the rest of our time talking
        • National problem requires national solution
                                                                                 about these things.
                     •All perils policy?

              •Reinsurance Task Force efforts

                                                making progress . . . together

Slide                                                                            The notion of a national plan makes
  5             Study Commission
                Study Commission                                                 sense in light of the fact that many
                                                                                 catastrophes have the potential to be
                                                                                 multi-state events.
          • At NAIC Summer Meeting in June                                       There are some catastrophes that
            2006, the membership voted                                           extend beyond the abilities of individual
            unanimously to recommend
                                                                                 states to respond – Katrina, September
            Congress form a national study
            commission on catastrophic
                                                                                 11 and others.
            strategies related to insurance                                      Florida took the lead in proposing that
                                                                                 we ask Congress to weigh in on this.
                                                                                 You may be surprised and ask “Aren’t
                                                NAIC                             the states trying to keep the feds out of
                                                making progress . . . together

                                                                                 Here’s an area where they can help.

Slide                                                                            It was my honor to address to the
  6           Congressional testimony
              Congressional testimony                                            United   States    Senate    Banking
                                                                                 Committee, which is the primarily
                                                                                 committee on insurance issues
          Last month, several commissioners                                      These are the highlights of my
            testified before two congressional                                   comments
            -- Need for federal strategy
            -- TRIA-type approach
           -- Federal backstop to marketplace

                                                making progress . . . together
Slide                                                                            I broached the subject of an all-perils
  7                   All-Perils Policy?
                      All-Perils Policy?                                         policy, which is currently not in the
                                                                                 There are solid reasons to consider
          • Wind insurance private market/flood                                  this:
            insurance federal government
                                                                                 Our bifurcated system of wind and
          • Exponential growth of state-sponsored
            wind programs                                                        flood is not working at any level …
          • Failure of flood program                                             particularly for consumers who are
          • Wind vs. Water disputes                                              stuck watching disputes between
          • Fewer earthquake policies in force                                   federal flood insurance program and
          • Erases consumer doubt                                                private wind carriers
                                                NAIC                             Then there’s the issue of earthquakes
                                                making progress . . . together

                                                                                 and terrorism. The private market has
                                                                                 shown little desire to get involved
                                                                                 But an all-perils policy gives the
                                                                                 consumer comfort in knowing every
                                                                                 eventuality is covered.
Slide                                                                            One area of emphasis for the NAIC is
  8               NAIC Reinsurance Task Force
                  NAIC Reinsurance Task Force                                    developing a proper strategy toward
                                                                                 dealing with reinsurers.
        • Movement toward risk-based evaluation of
                                                                                 A risk-based evaluation process is the
                                                                                 best way to go.
              •Understanding that insurance is an                                So as we analyze reinsurers: what will
                 international market concern                                    we be looking for? The criteria for
        •Reinsurance is the key component in market
                                                                                 analysis will include:
            stabilization in the U.S. and the world                              Regulatory Regime Equivalence …
                                                                                 Financial      Strength      Ratings    …
                                                                                 Operating Integrity … Business
                                                NAIC                             Operations/Controls … Claims Paying
                                                making progress . . . together

                                                                                 History     (troubled     and      healthy
                                                                                 companies) … Management Expertise
                                                                                 We’re      looking      for:     Structural
                                                                                 Framework        Recommendation         …
                                                                                 Standards for Evaluation … Process
                                                                                 for Appeals … Staffing Framework and
                                                                                 Cost      of       Implementation       …
                                                                                 Development of a Purposes and
                                                                                 Procedures Manual

Slide                                                                            Let’s take a look at my home state and
  9               Alabama & Hurricanes
                  Alabama & Hurricanes                                           what we’ve faced.
                                                                                 Alabama has been on the front lines of
                                                                                 natural disasters in the past three
          •   September 2004 – Ivan                                              years.
          •   August 2005 – Katrina                                              In the early morning hours of
          •   2006 season – peaceful (El Nino)                                   September 16, 2004, Hurricane Ivan
          •   2007 season – heavy activity                                       made landfall as a Category 3 storm on
              predicted                                                          the Alabama Gulf Coast.
                                                                                 Damage caused by Ivan would result in
                                                                                 65 of Alabama’s 67 counties being
                                                NAIC                             declared federal disaster areas. More
                                                making progress . . . together

                                                                                 than 200,000 claims were filed in
                                                                                 connection to Ivan in Alabama.
                                                                                 Katrina, which arrived a year later, did
                                                                                 more localized damage particularly in
                                                                                           south Mobile County, which is adjacent
                                                                                           to the Mississippi state line. While it
                                                                                           was primarily a flood event, it did result
                                                                                           in approximately 100,000 insurance
                                                                                           claims. You have seen what it did to
                                                                                           our neighbors in Mississippi and
Slide                                                                                      After Ivan, we convened a task force to
 10         Hurricane Insurance Issues Task Force
            Hurricane Insurance Issues Task Force                                          help develop solutions.
                                                                                           We proposed a captive insurers law
        •The Hurricane Insurance Issues Task Force
                                                                                           that has been enacted.
        issued a final report August 2005 that examined                                    We proposed changes to our state’s
        the department’s experiences with Hurricane                                        Beach Pool, which has been enacted.
        Ivan and proposed new regulations to improve                                       The Beach Pool changes have been a
        management of hurricane-related issues
                                                                                           necessity as private insurers have
        •In response, legislators approved a Captives law                                  excluded wind coverage or outright
        in the Spring of 2006 in order to provide                                          canceled 20,000 policies since Ivan.
        underserved commercial markets a new option                                        Other states have state-run and state-
        for insurance                           NAIC
                                                   making progress . . . together
                                                                                           backed       insurance      companies.
                                                                                           Alabama’s is backed by the licensed
                                                                                           companies who are assessed a pro
                                                                                           rata share of any losses.

Slide                                                                                      To help deal with claims handling, we
 11                     Alabama activities
                        Alabama activities                                                 followed our sister states and formed a
                                                                                           mediation program.
        Mediation program                                                                  Attorneys with the Legal Division of the
                                                                                           Alabama Department of Insurance with
          •Provides a mediation process for pending disputed
          claims from hurricanes Ivan and Katrina as well as
                                                                                           no connection to either the insurer or
          future claims related to disaster damage.                                        the insured act as the mediators. No
          ?Mediation is non-adversarial, non-binding,
                                                                                           cost to the insured.
          alternative dispute resolution procedure designed to                             This has been perhaps one of the best
          facilitate the resolution of disputed claims as                                  developments in the post-Ivan/Katrina
          quickly and as fairly as possible.
                                                                                           era. Our mediation program has
                                                          NAIC                             achieved a success rate of 93 percent.
                                                          making progress . . . together

                                                                                           That means fewer disputes ending up
                                                                                           in court which keeps down consumer
                                                                                           costs. It might not make the lawyers
                                                                                           happy, but we will consider that a plus.
Slide                                                                                                  Here’s what the mediation programs
 12                  Regional Mediation Programs
                     Regional Mediation Programs                                                       are doing in other states as compared
                                                                                                       to Alabama.
          ?93 percent success rate
                                                                                                       I submit the Katrina-ravaged states of
        Florida                                                                                        Mississippi and Louisiana are still have
          ?92 percent success rate                                                                     success, but not to the level of
                                                                                                       Alabama and Florida. The reason I
        Mississippi                                                                                    believe is because of the politically
          ?83 percent success rate
                                                                                                       charged legal atmosphere in those
        Louisiana                                                                                      states.
          ?75 percent success rate                                    NAIC
                                                                      making progress . . . together

Slide                                                                                                  There is has been a lot of cooperation
 13                 National/Regional Cooperation
                    National/Regional Cooperation                                                      between the states and the NAIC on
                                                                                                       catastrophes. Here’s a flavor of what
        -- NAIC headquarters sets up call center in Kansas City, Mo., for                              went on after Hurricane Katrina.
        Katrina-related inquiries

        -- NAIC issued data call from insurers regarding claims

        -- Alabama, Mississippi, Louisiana and Texas issued identical
        bulletins regarding non-cancellation due to non-payment of
        premium and out-of-network services for health care

        -- Other states sent consumer specialists to Louisiana and

        -- Alabama put together outreach to Mississippi and Louisiana
        evacuees temporarily housed in Alabama

                                                                      making progress . . . together

Slide                                                                                                  My challenge to you is to continue
 14                      Latin American nations
                         Latin American nations                                                        working together to develop strategies
                                                                                                       that work for your member nations.
        Coordination is crucial                                                                        I continue to believe that state-based
                                                                                                       regulation works in the U.S. because
        -- Continued dialogue and planning are best                                                    we have the tools we need to regulate,
        paths to success
                                                                                                       and we are closest to the people. But
        -- Claim full partnership in global insurance                                                  coordination between nations is crucial,
        marketplace                                                                                    and we must continue our best efforts.

                                                                      making progress . . . together

                        Committee Activities

                             Thank you!

                                                               making progress . . . together

To top