NAIC Adopts Often-Drafted Paper on Natural Catastrophes

The full membership of the National Association of Insurance Commissioners approved a white paper on natural catastrophe risks after more than four years and 15 drafts at its fall national meeting.

The NAIC Executive Committee and Plenary adopted the "Creating a Comprehensive National Plan" paper, which Illinois Insurance Director Michael McRaith, chairman of the Property and Casualty Committee, described as "far more comprehensive and global" than first envisioned.

As advanced by McRaith's committee at the NAIC's summer meeting in June, the paper includes a wide range of perspectives on how to best prepare for and address potential catastrophes. It saw approval after committee members concluded they would be unable to agree on a single, unified approach the issue (BestWire, June 17, 2009). The approved paper reflects "a variety of approaches" backed by state regulators. McRaith said.

Points of consensus include: that there is potential for the United States to experience a "mega-disaster"; that a national plan should promote personal responsibility among policyholders; that a national plan should support "reasonable" building codes, land-use development plans and other mitigation tools; that a national plan should maximize the risk-bearing capacity of the private markets; and that a national plan should provide "quantifiable risk management" by the federal government.

As he did in June, South Dakota Director of Insurance Merle Scheiber cast the lone vote against the white paper.

First introduced in 2005, the white paper had been drafted 15 times as the NAIC struggled to form a consensus to outline what a comprehensive national natural disaster plan should look like. Some argued it is too focused on the needs of Florida. Other concerns revolved around the role of the federal government outlined in the paper (BestWire, June 17, 2009).

The white paper is a guiding statement of principles for the association, but lacks the authority of a model law.