Monday, May 14, 2007                                                       

                                                                                               
Homeowners Poised to Annually Save $11.6 Billion if Catastrophe Protections Enacted
Only a Matter of Time for Catastrophe to Strike According to Weather Experts

(Washington, D.C.) - American homeowners will save $11.6 billion annually if privately funded catastrophe protection programs are established in disaster-prone states and backed up by a similar national program, according to Milliman, Inc., one of the nation’s leading actuarial and consulting firms.

'An integrated program that includes a state catastrophe fund and a national backstop in addition to the traditional insurance market, while helping to fund mitigation efforts, enhance first responder programs and expand homeowner education, would save American homeowners an estimated $11.6 billion per year,' according to Dr. David Appel, Principal and Director of Economics Consulting for Milliman.

'Our actuarial analysis confirms and validates the notion that such an integrated program which transfers some of the cost of private reinsurance into tax exempt catastrophe funds would produce significant annual savings for American homeowners,' he added.

Comprehensive catastrophe preparation and protection programs are critical to the nation, based on general weather predictions offered today by Kenneth Reeves, Expert Senior Meteorologist and Director of Forecast Operations at AccuWeather.com, the nation’s largest private weather forecasting agency.

'As the population expands and continues to gravitate to the nation’s coastline, catastrophic weather events such as hurricanes will have an ever-greater impact on some of the most densely populated regions of the county,' according to AccuWeather.com’s Reeves.

'Hurricane Katrina was a warning to the rest of the country that we need to be better prepared,' said Reeves. 'Despite several days of advance notice, many people were still not ready for the fury it unleashed on the Gulf Coast. Those who were could do little or nothing to save their property and possessions. And the lesson of Katrina does not just apply to coastal communities—as we just saw, virtually the entire town of Greensburg, KS, was destroyed by a tornado less than two weeks ago.'

'These reports should serve as a wake-up call to everyone in America. Our country needs to be better prepared and protected before the next catastrophe strikes,' said James Lee Witt, former FEMA Director and co-chair of ProtectingAmerica.org, a coalition of more than 200 organizations calling for action by Congress and state legislatures to enact comprehensive catastrophe protection programs.

'Our current financial recovery mechanisms, which rely primarily on the private insurance market, federal assistance in the form of low-interest loans and a handful of state catastrophe funds, are incapable of meeting the needs of victims and the immeasurable costs that follow a catastrophe. It is our obligation to retool the system today to be prepared for what can happen tomorrow,' Witt continued.

'Beyond helping to insure for monetary losses, state and federal catastrophe funds will improve the way America is prepared for and protected from catastrophe. Our solution calls for new programs and processes that would speed relief, recovery and rebuilding,' said Admiral James Loy, former Deputy Secretary of Homeland Security and ProtectingAmerica.org co-chair.

'When a hurricane is on the radar screen, it is too late to begin thinking about preparedness. As afforded by the establishment of a national catastrophe fund, programs to improve preparedness and enhance prevention and mitigation programs are invaluable in advancing our nation’s capability to minimize damage and recover efficiently,' Loy continued.

The Milliman report found that if a national backstop mechanism is enacted and state catastrophe funds are created in the states outlined in the report, consumers will realize annual savings in excess of $11 billion in their homeowner’s insurance premiums. State-by-state savings would vary according to a number of factors, including the likelihood of a natural catastrophe, population density and the value of residential property. For example, annual savings per household in California would average $256; Louisiana, $224; North Carolina, $132; and Oregon, $127.

'Part of the beauty of this approach is that residents of risk-free states would not pay a dime into a catastrophe fund. This would significantly reduce the current cross-subsidy that occurs when the federal government steps in to repair and rebuild in the aftermath of regional catastrophes,' said Admiral Loy.

Florida Insurance Commissioner Kevin McCarty estimated that the 2004/2005 hurricane season cost every American taxpaying family more than $800 to cover the costs of repairing and rebuilding damaged areas of the Gulf region.

View the full report.

About ProtectingAmerica.org

ProtectingAmerica.org is a non-profit organization consisting of emergency management officials, first responders, disaster relief experts, insurers and others. Its members include the American Red Cross and more than 200 other organizations and businesses.

At the core of ProtectingAmerica.org’s mission is the establishment of a comprehensive, integrated national catastrophe management solution that will better prepare and protect American families, communities, consumers and the American economy from catastrophe. ProtectingAmerica.org is working to increase public awareness and enhance consumer education; advocate for better coordination with local, state and federal mitigation and recovery efforts, and strengthen emergency response and financial mechanisms to rebuild after a major catastrophe.

The organization supports comprehensive federal legislation that would establish a privately financed national catastrophe fund that would serve as a backstop to state catastrophe funds. The funds’ private deposits and the majority of its earnings could only be used to cover replacement and rebuilding costs following major catastrophic events. A portion of the funds’ earnings would be dedicated to increase public and consumer education, strengthen first responders, and enhance building codes and their enforcement.

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