Scared Monkeys Discussion Forum

In advance of a House committee hearing on flood insurance, an industry trade group wrote urging the panel to back a long term extension of the National Flood Insurance Program.

The message from Leigh Ann Pusey, president and chief executive of the American Insurance Association, to the House Financial Services Committee Insurance Program (NFIP) also voiced opposition to two catastrophe-related bills -- The Homeowners Defense Act (HR 2555) and the Multiple Peril Insurance Act (HR 1264).

 Her letter addressing Committee Chairman Barney Frank, D-Mass. and Ranking Member Spencer Bachus, R-Ala commended them for scheduling a drafting session for Thursday on the Homeowners Defense Act; Multiple Peril Insurance Act of 2009; and the Flood Insurance Reform Priorities Act of 2010.

“While we strongly support the Committee’s effort to reauthorize and reform the National Flood Insurance Program, AIA must stand in strong opposition to the Homeowners Defense Act and the Multiple Peril Insurance Act,” her letter said.

“Although state property insurance programs are meant to serve as markets of last resort, in reality, they displace private market insurance and reinsurance.  Moreover, they encourage a state to warehouse its catastrophic risk within the state, rather than spread risk through global reinsurance markets,” Ms. Pusey said. 

She mentioned that the bill does not require a state program to charge risk-based premiums, maintain adequate reserves, establish a solid, private-market reinsurance program, or manage its finances to an acceptable level of risk.  “In other words, the legislation does not require that the state program have any ‘skin in the game,’” her letter said.

The Multiple Peril Insurance Act, which would add wind damage coverage to the National Flood Insurance Program, has  AIA opposition, Ms. Pusey wrote, because a “GAO study done on this proposal warned of the operational challenges and potential exposure of the federal government to a huge and potentially under-funded liability for hurricane wind damage.” 

In AIA’s view, “The Congressional focus should be on returning the NFIP to financial soundness, not adding a coverage that is now available in every state through either the traditional private market or state residual markets”

The Homeowners Defense and Multiple Perils bills, " do nothing to expand true property insurance underwriting capacity. Rather , they encourage warehousing risk while expanding federal taxpayer exposure," AIA's letter said.

Frankly, the banking system ran a lot better before deregulation in 1999 (UNDER BILL CLINTON). It ran a lot better before the like of BARNEY FRANK and CHRIS DODD meddled in mortgages/Fanny/Freddie.

Too big to fail is too big to exist.

The derivatives mess almost brought down the banking system under the Long Term Capital Management fiasco in 1998, and then DID bring down the banking system in 2008. We should have learned the first time that economists and traders have only a vague understanding of the full implications of the derivatives market.

I am a conservative, and Republicans are STUPID to see the system almost completely collapse TWICE and not put strict measures in place to make sure that it doesn’t happen again. This is a case where too much regulation was the lesser of two evils (the other being complete banking system collapse).