Insurers Irked As NAIC Mulls Possible Cat Model Program

NATIONAL HARBOR, MD.—Insurance industry representatives are raising concerns about possible plans by the National Association of Insurance Commissioners to develop its own natural catastrophe models.

The representatives who are here attending the NAIC Fall 2009 meeting questioned the closed-door nature of the NAIC’s discussions on the plan, as well as the costs and the purpose when private sector companies already produce catastrophe models of their own.

Eric Goldberg, associate general counsel and manager, state programs for the American Insurance Association, said there has been a lack of process in the NAIC’s decision-making. He said there have been no open discussions, and the plan was mentioned for the first time only in passing at the NAIC’s Summer 2008 meeting. Since the insurance industry would provide funding for such an undertaking, he asked the NAIC to be more open with its plans.

He said rumors indicate that costs for the project could be $12-to-$15 million, spread over two years, to develop the models, and millions more to maintain them—all to replicate what private modelers already provide.

While he said the NAIC has cited increased use of proprietary models by the industry as a cause for concern, he added that modelers have been willing to share their proprietary models with regulators and educate them on how the models are used.

Deidre Manna, vice president, industry, regulatory and political affairs for the Property Casualty Insurers Association of America (PCI), asked the NAIC to be more transparent in its discussions. She said she is concerned there will be few, if any discussions with the industry, followed by a multimillion-dollar line item in the NAIC’s budget for the project.

Iowa Commissioner and Industry Liaison Chair Susan Voss said regulators are simply trying to be thoughtful in how they approach catastrophes. She said there have been no concrete decisions made yet regarding whether the NAIC will move forward with developing cat models, and added the NAIC is not prepared to unveil any plans at this moment.

She said the NAIC does not want to compete with private modelers but rather wants to see if it can enhance what regulators already do for consumers.

She noted there will be nothing in the budget for 2010 regarding this project, and said it remains to be seen whether the plan will be realized at all.

Health Care

Also discussed at the Industry Liaison meeting, Dave Snyder, AIA vice president and associate general counsel, raised concerns with an amendment proposed by U.S. Senator Jay Rockefeller, D-W.Va., to the health care bill developed by Senator Max Baucus, D-Mont. Under the amendment, Mr. Snyder said, all medical coverage payments would be moved from auto and workers’ compensation companies to health care companies.

Mr. Snyder said this would be pooling systems that work well into a system that is under stress, and added the plan “makes absolutely no sense.”

He also said such a plan would alter the risk-based pricing in auto insurance that benefits insurers and consumers alike.

Mr. Snyder called on regulators to oppose the proposal.