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Members of Congress discuss issues at III briefing.

Members of Congress Discuss Issues at III Briefing

By most estimates, the insurance industry is facing a disquieting future. Health care costs are rising to record levels and many industry analysts predict the onset of a hard market in the next couple of years. What's more, anyone looking to the federal government for answers to these problems should keep in mind that members of Congress, like everyone else, are really just citizens trying to do the best they can.

Speaking at the International Insurance Institute's 22nd Annual Government Briefing Session, Sen. Alan Simpson, R-WY, told attendees that legislators deal all day long with extremists on both sides of every issue. "If you think we can do that with equanimity, you're crazy as hell!" he said.

He added that despite the fact that out of 535 congressmen, 20 are under the gun for something, Americans should be mindful of the good work accomplished by the other 515. "It's news buried in the newspaper next to the truss ads," Sen. Simpson said. "Some of us are lightweights, screwballs and boobs--just as in your respective businesses--so I guess that makes it a representative Congress."

Sen. Simpson also cited time constraints that impinge on the Senate's agenda. "The sanctity of McCarran-Ferguson must be preserved," he said. "But there is more and more activity to press for a different result. Right now the Judiciary Committee is really clogged and we are recessed the entire month of August. There just isn't time by following Senate rules to get anything done."

Tight time frames also influence Rep. Doug Walgren, D-PA, chairman of the House Commerce Subcommittee--perhaps the most significant subcommittee pertaining to insurance--in setting his agenda. In what amounted to a plea for input, Rep. Walgren encouraged attendees to contact his office about insurance issues they felt strongly about.

"The first and most legitimate interests lie in solvency and safety regulations," he said. "Regarding the regulation of banks and their involvement in insurance, we would like to look at their selling and underwriting of insurance. Our instinct is to feel very skeptical about that."

Rep. Walgren said he is bothered by "the incremental accruing of power by unelected regulators." Such a situation, he feels, can greatly upset the delicate balance banks must maintain to do business. "The Banking Committee has primary authority in this area, but my subcommittee expects to be a full partner in any ensuing discussions," he said.

As to the issue of insurance safety regulations, Leslie Cheek, senior vice president-federal affairs for Crum & Forster Insurance Co., said signals were mixed about what approach Congress would take concerning whether or not to overhaul Superfund. There are three schools of thought in Congress, he said.

The first is to "duck the issue" and roll over Superfund authority in its current form without making substantive changes. The second school of thought, according to Mr. Cheek, is to allow more rigorous congressional oversight. The third is to just go with the current momentum that has taken 10 years to gain currency.

Unfortunately, Mr. Cheek feels that momentum is proceeding at a snail's pace. "The last three Environmental Protection Agency administrators had great character," he said. "They were dedicated to Superfund enforcement, but the record remains dreary." Mr. Cheek cited statistics of less than 50 cleaned up sites out of a total of 1,200, with an average of 3.5 years needed to clean each site. In addition, Mr. Cheek said 30 percent to 60 percent of Superfund resources are spent on lawyer's and consultant's fees.

Insuring 'The Big One'

In a session on insuring against earthquakes, two California congressmen spoke about bills they are proposing that would provide coverage for such disasters where previously there were massive availability and affordability problems.

According to Rep. Dave Dreier, R-CA, the recent San Francisco earthquake necessitated the need for a coverage solution. "It's imperative that we have a national plan because 30 states could potentially suffer a disastrous earthquake--and that's regardless of state boundaries," he said. "Within the next three years, we want to come up with a partnership between the federal government and the insurance industry to deal with this problem."

According to Rep. George Brown, D-CA, who is proposing his own earthquake insurance bill, "We are spending only one-third of the resources on earthquake research and analysis than was recommended in the mid-1970s." Rep. Brown added that he had a "strong bias" regarding the need to provide new methodology to improve existing industrial and commercial structures, building designs, railroads and utilities. "The insurance industry is reluctant to move beyond hazard mitigation legislation," he said. However, he believes that in the future the insurance industry will cut back rates and build large reserves for earthquake mitigation.

"I do not feel there is any inherent conflict in our bills, but we must be pragmatic," said Rep. Brown, citing the fact that Rep. Dreier's bill adopts a more aggressive free market approach toward administration. "I would like to see the government take a more active role. My emphasis is on stronger incentives to engage in mitigation controls. And I think we will have to go to considerable lengths to see where 'stakeholders" interests are because builders and contractors may balk at mitigation controls."

Under Rep. Dreier's bill, the director of the National Flood Insurance Program would head the corporation that administers the earthquake program. As to whether the government might be wary of underwriting another guaranty program so soon after the savings and loan bailout, Rep. Brown said it is difficult to determine how much reserves will be needed in the event of a catastrophic earthquake. "That's why the federal government should be the insurer of last resort," he said. "Hopefully, the reserve fund will adequately cover any losses."
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Title Annotation:International Insurance Institute's 22nd Annual Government Briefing Session
Author:Johnson, Tom
Publication:Risk Management
Date:Aug 1, 1990
Words:958
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