Toward Greater Efficiency in Funding Disaster Recovery through Private/Public Insurance

1. Toward Greater Efficiencyin Funding Disaster Recovery through Private/Public Insurance A Presentation at the National Association of Insurance Commissioners NAIC Consumer Liaison Meeting Amy Bach, Executive Director, United Policyholders S. Colleen Repetto, Executive Director, FIRM (Fair Insurance Rates in Monroe) Saturday, December 5, 2009

2. About UP • A national 501 (c) (3) non-profit with 18 years of experience with post-disaster claim scenarios • Advisory Boards include: • Agents/Brokers • Attorneys • Disaster victims/survivors • Funded by donations and foundation grants • Work in coordination with regulators and staff, elected officials, social service and faith-based non-profits • Educating the public on insurance issues through broadcast and print media and the Internet

3. Three Programs • Roadmap to Recovery™ [Post-disaster]Tools and resources for disaster victims, case managers/aid workers. • Roadmap to Preparedness [Pre-disaster] Tools and resources aimed at promoting financial preparedness and loss mitigation. • Amicus Project and Advocacy work [Legal and Other] Advancing the interests of policyholders in courts of law, regulatory agencies and legislative proceedings

4. The current lay of the land • Quasi-public insurers/pools are growing • Property owners in many areas now need 3 different policies in order to be fully covered: • Standard HO • Flood • High wind/hurricane/earthquake • Three different policies, deductibles

5. Multiple Policies = Inefficient • Overhead x 3 • Adjusting personnel x 3 • Paperwork x 3 • Premium x 3

6. Confusion and conflicts • Recent revelations re: TWIA claims handling improprieties: • “The Texas Windstorm Insurance Association used prices lower than market rates to estimate materials and repair costs, unfairly limited costs on roof repairs and discouraged reopening closed claims, a League City home-owner alleges in a lawsuit that includes internal TWIA e-mails and documents” Houston Chronicle, 11/11/09 • 2008 GAO Report: There is an “inherent conflict of interest” in having private insurance companies determine who is responsible for paying wind-versus-water damages following hurricanes—the insurer or the National Flood Insurance Program, a federal government report suggests… • Post-Katrina revelations re: WYO adjuster conflicts led to Qui Tam actions/litigation

7. A return to all-risk policies would be ideal; but in the Here and Now • Americans are uninsured and underinsured for natural catastrophes [GAO report at page 2] • 88% of the homeowners in CA. have no EQ insurance • We’re inefficiently funding catastrophe recovery with post-tax dollars/Large amounts of post-disaster aid have been distributed to uninsured and underinsured property owners

8. Unaffordable, any way you look at it • The fluctuating and heavy cost burden of private reinsurance has made state program products unaffordable • Following 2005 hurricanes, and beforethe current economic crisis, 41% of impacted homeowners did not have any or enough insurance to cover damage incurred • Congress appropriated approximately $88 billion in emergency appropriations

9. Immediate steps can be taken • Public insurance programs need access to reasonably priced capacity to meet high level risk exposures and sell affordable products • Any of three federal legislative vehicles can be enacted: • SB 886 • HR 4014 • HR 2555

10. Sound Public Policy • Federal guarantees of State programs’ post-event debt will provide dramatically enhanced debt-market access, across all market conditions, at much lower borrowing costs. • Meet the ongoing common need of established programs in California, Florida, Louisiana, and Texas for reliable, adequate private financing.

11. References • November 2007: Natural Disasters: Public Policy Options for Changing the Federal Role in Natural Catastrophe Insurance, United States Government Accountability Office, Report to the Ranking Member, Committee on Financial Services, House of Representatives • July 2009, An Economic Assessment of the Homeowners Defense Act of 2009, Orszag/Fontaine

12. United Policyholders Amy Bach Executive Director info@unitedpolicyholders.org

13. Who is FIRM? ● FIRM (Fair Insurance Rates in Monroe) is a 501c 4, grassroots organization founded in Key West with 5,000+ members countywide, organized and represented by volunteers and funded through donations ● Brought attention to statewide windstorm insurance crisis ● FIRM successfully challenged Citizens Property Insurance Corporation (CPIC) 2006 Monroe County FL windstorm rate filings ● FIRM presents engineering, meteorological, historical and geographical factors to Florida’s legislature, Florida’s Hurricane Commission, Florida’s Catastrophic Risk Modelers, the Office of Insurance Regulation and others at public hearings to fight for fair, equitable, and non-discriminatory windstorm insurance rates ● FIRM has worked with a coalition of consumer groups around the state of Florida for insurance reform

14. Natural Disasters affect All of Us • Natural disasters are a nationwide problem • All taxpayers pay for uninsured or underinsured nationally declared disaster recovery and rebuilding through FEMA NOW • No matter how much or how little funding any state receives through FEMA, our federal tax dollars are spent on property owners nationwide to repair or rebuild after a natural disaster • Since 1953, all 50 states and 5 territories have received FEMA/taxpayer financial assistance post-national declared natural disasters (1) • US has sustained 90 natural disasters over the past 29 years in which estimated losses, insured and uninsured, exceed $700 billion (2) • There have been 51 natural disasters declared in 2009 among 27 states and Puerto Rico with no hurricanesin FL or earthquakes in CA(1) • Source: FEMA Disaster • Source: National Climatic Data Center

15. Responsible Coverage • Insurance companies could provide all risk policies to a capped limit of liability • Property owners need to take personal responsibility and buy insurance for their natural catastrophe exposures • The Homeowners’ Defense Act of 2009 (H.B. 2555) provides a Catastrophe Obligation Guarantee as reinsurance for eligible state programs • We ask all regulators to support a National CAT plan which supports insurance companies who offer all risk policies, states who establish their own CAT fund, and a federal guarantee backstop program to help repair and rebuild after natural disasters strike

16. Dollars and Sense • A Federal program supports and encourages prevention and mitigation • H.B. 2555 promotes the use of private market capital as a means to insure against such catastrophes, to expedite claims and better assist in financial recovery • A Federal program supports state sponsored insurance programs to help homeowners prepare for and recover from natural disaster damages • Making Federal guarantees available would enhance the ability of eligible state programs to issue debt and will minimize taxpayers exposure where the taxpayers may otherwise bear the consequences of underfunded programs or underinsured communities following a natural disaster

17. NAIC • The NAIC has supported creating a comprehensive national plan for many years • All taxpayers are picking up the tab now • Let’s make it proportionately fair and bundle our financial resources nationwide to spread the risk and better protect and serve consumers

18. Support Legislation in 2010 ●We ask regulators to encourage their state legislators to support appropriate land use regulations, strict building codes, and mitigation efforts which in turn would reduce exposure and minimize the need for taxpayer dollars to fund post-disaster damages • The 2010 Spring Congressional agenda will address the reauthorization of the National Flood Insurance Program, and at that time, there is expected to be a focused discussion on a National Natural Catastrophe Plan • Further, we ask regulators to request their Congressional representatives to co-sponsor SB 886, HR 4014, and HR 2555 • There is wide bi-partisan Congressional support for these bills across 33 states.

19. Summary ●A multi-level, comprehensive all risk program benefits all property owners and taxpayers • All states and territories are affected, one way or another • All consumers deserve to be treated fairly, and make their proportionate contribution to the solution • Legislation will be considered in the Spring 2010 and needs your support

20. FIRM(Fair Insurance Rates in Monroe) • S. Colleen Repetto, Executive Director, FIRM (Fair Insurance Rates in Monroe) 305-731-9101

21. Thank You