NEWSROOM
Should
flood insurance give way to ‘hurricane insurance’?
June
19, 2008
NEW ORLEANS
– Without insurance, there will be no recovery, insurance
industry experts and members of the Louisiana congressional delegation
said Monday (June 16).
Speaking at
the 4th Presidents’ Forum on Meeting Coastal Challenges,
which took the form of a daylong seminar on property insurance
in coastal Louisiana, a lineup of speakers representing the insurance
industry and the public sector laid out their assessment of the
insurance situation for coastal areas subject to the destructive
forces of tropical storms and hurricanes.
Like it or
not, without insurance, recovery from the 2005 hurricanes will
stall, Dr. William Jenkins, president emeritus of Louisiana State
University, told approximately 200 people who attended the conference
sponsored by the LSU AgCenter, the Louisiana Sea Grant College
Program, the Louisiana Department of Insurance and America’s
Wetland Foundation.
R. King Milling,
vice chairman of Whitney Bank in New Orleans and chairman of America’s
Wetland Foundation, said the Gulf Coast is recovering from the
largest natural and manmade disaster in the history of the United
States.
In order for
recovery to continue, he said, people who rebuild have to have
assurances they can get affordable insurance.
“After
the storms of 2005, homeowner and business property insurance
rates increased significantly,” said Dr. Paul Coreil, vice
chancellor with the LSU AgCenter, one of the sponsors of the meeting.
“With
new building codes statewide, the LSU AgCenter continues to sponsor
educational programs that focus on best building practices that
hopefully will lead to reduced property losses and help stabilize
property insurance options so critical to citizens and businesses
that continue to rebuild after Katrina and Rita,” Coreil
said.
The conference
featured three members of the Louisiana congressional delegation,
who laid the groundwork for the day’s discussions.
Rising insurance
rates have retarded recovery, said U.S. Rep. William Jefferson,
D-New Orleans.
Jefferson
said courts have determined insurance regulation is a state issue
because it’s not involved in interstate commerce. On the
other hand, he added, the Federal Housing Administration, the
U.S. Small Business Administration and other federal agencies
that provide loans require insurance. If that’s the case,
he said, the federal government has an interest in insurance.
Jefferson
said insurance is a regional issue that “should cut across
state lines” and that Congress is discussing subsidies for
purchasing insurance for catastrophes.
Sen. David
Vitter, R-La., said that while levee protection is still uppermost
in the minds of many in south Louisiana, wind insurance needs
to be added to flood insurance to help people recover from hurricanes
and related catastrophes.
“We
understood in the weeks following Katrina the enormous gaps in
that system and engineering flaws,” Vitter said of the levees.
Vitter added
that the “single-most important” role of the federal
government is to provide protection from a 100-year weather event
by the 2011 hurricane season. He called the U.S. Army Corps of
Engineers’ initial cost estimates for restoring south Louisiana
levees “very, very low.”
Vitter also
expressed concern some Louisiana levee systems may be decertified.
If that happens, people behind those levees would lose their insurance
ratings.
Because the
legislation behind the federal flood insurance program expires
this year, Vitter said, Congress has an “opportunity to
try to improve that program and use it as an opportunity to bring
up wind and liability issues.”
Rep. Charles
Melancon, D-Napoleonville, said people in Orleans, Jefferson and
St. Bernard parishes perceived they were protected because of
the levees built over the years. People in Cedar Rapids, Ames
and Des Moines, Iowa, had the same ideas, he added.
Melancon said
federal flood insurance funds collected from policy holders are
deficient because homes have been underinsured over the years.
Unlike many homeowner policies, he said, federal flood insurance
policies are not automatically adjusted for inflation.
“We
need actuarially sound rates,” he said.
Although federal
flood insurance rates are subsidized by the federal government,
Melancon said the government shouldn’t subsidize rates for
second and third homes.
“People
who can afford second homes should be able to afford nonsubsidized
flood insurance,” he said.
Following
Jefferson, Vitter and Melancon, the program featured presentations
on the variety of flood insurance options available to businesses
and individuals, background on the federal flood insurance program
and a variety of ways state and local governments can address
hazard mitigation.
Louisiana
insurance commissioner James Donelon, who was instrumental in
putting the conference together, said Louisiana has to find new
ways to address property insurability in hurricane-prone areas.
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