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GAO-10-568R 1 (2010-05-17)

handle is hein.gao/gaobacejt0001 and id is 1 raw text is: A ~G A 0 .. .. A aointab lty I Integrity I Re|ability United States Government Accountability Office Washington, DC 20548 May 17, 2010 The Honorable Spencer Bachus Ranking Member Committee on Financial Services House of Representatives Subject: Natural Catastrophe Insurance Coverage Remains a Challenge for State Programs Dear Mr. Bachus: Natural catastrophes can adversely affect U.S. residents and businesses by causing extensive property damage. The 2005 hurricanes and other recent natural disasters have had significant effects on the cost of obtaining insurance against such risks, especially in high-risk areas. As private market insurers have raised their premium rates, an increased number of residents have obtained coverage through state-sponsored natural catastrophe programs. Questions have been raised concerning whether some of these programs will be able to pay losses in the event of a major catastrophe. Several legislative proposals have been made that would create a federal role in supporting these state programs. In a previous report for you, GAO identified public policy goals for government involvement in natural catastrophe insurance and applied those goals to potential changes in the federal government's role. 1 Those goals were developed based on insights from past GAO work, a review of legislative histories, and interviews with public and private sector experts, and included (1) charging premium rates that reflect the risk of loss, (2) encouraging broad participation, (3) encouraging the private market to provide natural catastrophe insurance, and (4) limiting costs to U.S. taxpayers. In other work, we have discussed the importance of mitigation efforts in reducing the damage and losses that could result from a natural catastrophe.2 The information that follows updates our past work by evaluating the extent to which these public policy goals, as well as the goal of increased mitigation, are supported by selected state natural catastrophe insurance programs, selected legislative proposals for increasing the federal role in natural catastrophe insurance, and selected natural catastrophe insurance programs in other countries. 'See GAO, Natural Disasters: Public Policy Options for Changing the Federal Role in Natural Catastrophe Insurance, GAO-08-7 (Washington, D.C.: Nov. 26, 2007). 2See GAO, Natural Hazard Mitigation: Various Mitigation Efforts Exist, but Federal Efforts Do Not Provide a Comprehensive Strategic Framework, GAO-07-403 (Washington, D.C.: Aug. 22, 2007). GAO-10-568R Natural Catastrophe Insurance Coverage

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