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Lobbies split over CAT funding: insurers argue over how to tame CATs.

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 ear without seatbelts or airbags," according to reports.

When it comes to financing future catastrophes, said William E. Bailey, managing director of the Hurricane Insurance Information Center, the industry is split between those who don't want any government intervention, and those who feel that the industry can't survive future megacatastrophes without it.

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 Program.

But the lobbying group called, a coalition of public, private and nonprofit local and national entities, has put its weight behind H.R. 4366, a bill sponsored by Pep. 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.
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Title Annotation:UPFRONT: News, Updates and Other Emerging Strategies from Around the World
Author:Brodsky, Matthew
Publication:Risk & Insurance
Date:Oct 15, 2006
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