Majority insurers oppose catastrophe backstop

A proposed federal catastrophe backstop would not be a good idea as it would be “detrimental” to the industry and encourage continued development in risk-prone areas, according to members of the insurance industry who recently responded to a survey conducted by Best’s Review. Most respondents however responded that if a backstop were created they would want a coverage trigger of (US)$100 billion. The majority of respondents at 46.7% said they would not support the creation of a national fund to backstop major natural disasters while approximately 41.6% said they would support such a fund. The reasoning for this support was that a backstop would allow for planning before a disaster, as well as expand coverage in Florida and other areas with an availability crisis and help ensure the solvency of the industry. A federal backstop would allow some insurers to write new business in coastal areas and states where they do not normally write, according to some respondents. However, Best’s Review’s survey also reports that some believe a backstop would force non-coastal and low-risk homeowners to subsidize homes for those in high-risk areas. The survey reports that respondents in high-risk areas would welcome a federal backstop.Respondents to the survey, according to Best’s Review, include online subscribers and visitors to the magazine’s Web site.