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JONI JAMESA group is trying to build support for a federal insurance catastrophe fund that can pass muster with Congress.
BURLINGAME, Calif. - For Floridians, the stories have a familiar ring.
Residents caught unaware by a storm's vengeance die. Thousands struggle without electricity, crop damages top millions of dollars and transportation halts amid blocked roads and gas shortages.
But those headlines aren't from Florida or any Gulf Coast neighbor. They began 10 months ago in Southern California. A strong, relentless rainy season caused horrific mudslides, flooding and flowing debris. Twice, in February and April, President Bush declared the region a federal disaster area.
Florida Insurance Commissioner Kevin McCarty is hoping nearly everyone who joins him at a convention hotel near San Francisco International Airport remembers those mudslides or one of the other 41 disasters declared by Bush in 2005, from Maine ice melts to devastation from Hurricane Katrina.
Over the next two days, McCarty and insurance commissioners from California, Illinois and New York will host participants from across the insurance industry in an attempt to do what others, particularly Florida politicians, have failed to do for a dozen years: Draft a proposal for a federal insurance catastrophe fund that can pass muster with Congress.
The message: No one in America is immune to natural catastrophe. And nearly every property owner could benefit if the federal government implemented a catastrophic insurance fund to spread the liability for the worst of disasters.
Their theory is that relieving private insurers of the vast uncertainty of covering the worst natural disasters will encourage more capital investment in the market. Ideally, they contend, more insurers would enter the market, competition would cause prices to stabilize or drop, and property owners would be more likely to buy more coverage.
But what sounds good in theory has failed miserably in finding support on Capitol Hill. And signs aren't terribly encouraging for this new effort.
Only 15 state insurance departments are formally sending representatives, organizers said.
Lawmakers from states with less costly disasters wonder if the approach makes sense for their taxpayers. They argue residents who buy homes near coastal zones or along earthquake fault lines do so willingly.
Why should a farmer in Iowa bail them out? Isn't it Florida's problem for allowing so much construction on its barrier islands?
Plus, Congress, just four years after the 9/11 attacks, has yet to agree to renew the terrorism insurance law that expires at the end of the year. It created a fund to cover losses from a terrorist attack in excess of $30-billion.
But McCarty and his colleagues are hoping that if nothing else, the recent tragedy of Hurricane Katrina - with insured damages potentially topping $60-billion - will remind Americans everywhere of the horrors and cost of catastrophe after the fact. It's still unknown how much the federal government will spend to rebuild the decimated coastlines of Louisiana and Mississippi because private insurers don't have the resources to do so.
"The current system of financing catastrophe losses after the fact is not working," McCarty said. "We need a comprehensive federal solution that prefunds catastrophic losses, not funding after the event, using the federal deficit."
It was after 1992's Hurricane Andrew and the collapse of Florida's insurance market that state officials began proposing some kind of federal backstop.
Then-U.S. Rep. Bill McCollum, R-Longwood, took up the cause. Throughout the 1990s he sought to create a fund that would be triggered only in the most catastrophic of hurricanes, tsunamis and earthquakes.
Damage totaling more than $25-billion was often cited as the threshold. Despite garnering support from a handful of states, by the time McCollum left office last year, he had nothing to show for the effort.
Last year, after Florida was whacked by four hurricanes in a season, speculation grew again that the timing was right for a national catastrophe fund. While none of the storms individually met that $25-billion threshold, they served as a reminder that Florida and other states had no plan for a cataclysmic event: the once-in-100-years disaster that racks up insured losses of $40-billion or $50-billion. But nothing in Congress changed.
"I wish them well," McCollum said Monday of those attending the California summit. "If they can figure out any way to lower those insurance rates for homeowners, I'd support it." McCollum, now practicing law in Orlando, is vying for the Republican nomination for Florida attorney general in 2006.
There is some cause for optimism. Florida Gov. Jeb Bush has been campaigning nonstop for a catastrophic fund for months. And many have faith that this unprecedented two-day summit of regulators and the industry could draft a framework that might finally win congressional support.
Their timing is the best it has ever been.
"If we have any shot at all, it's because of the devastation along the Gulf Coast," said Rep. Dennis Ross, R-Lakeland, chairman of the Florida House Insurance Committee, who planned to attend the summit. "It's no longer just Florida or California craving a federal backstop."
--Joni James can be reached at 850 224-7263 or jjames@sptimes.com