A FEDERAL “SOLUTION” FOR REINSURANCE FOR CATASTROPHE RISKS?
There are three bills pending in Congress concerning reinsurance for catastrophe risks. Such bills have been introduced in prior years and generally have died in committee, and the same is true so far this year. H.R. 240 would authorize the Treasury Department to provide reinsurance to “eligible state programs” for homeowners cat risks. The bill specifically provides that this program “shall not displace or compete with the private insurance or reinsurance markets or the capital market ….” H.R. 737 would establish a non-profit entity which could issue what amounts to cat bonds for its members. The members of this organization would be a state which has established “a reinsurance fund or has authorized the operation of a State residual insurance market entity, or State-sponsored provider of natural catastrophe insurance ….” H.R. 1101 would provide a federal reinsurance program for individual state or multi-state cat risk plans. None of these bills have progressed beyond being referred to a committee. Given the current capacity and pricing of cat risk private reinsurance and cat bonds, these bills appear to present a “solution” in search of a problem.
This post written by Rollie Goss.
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