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Insurance Experts Meet on Natural Disasters

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Insurance Experts Meet on Natural Disasters

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Insurance Experts Meet on Natural Disasters

Insurance Experts Meet on Natural Disasters

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Insurance experts meet in California Wednesday to devise a national catastrophe insurance program to deal with the cost of hurricanes, earthquakes, and acts of terrorism. California, Florida, New York, and Illinois, all high-risk states, organized the meeting.

STEVE INSKEEP, host:

As costly as this year's hurricanes have been, forecasters say we should be prepared for something worse, and that's why insurance experts meet in California today. They're preparing for an even bigger catastrophe such as a costlier hurricane, an earthquake or a terrorist attack. NPR's Scott Horsley reports.

SCOTT HORSLEY reporting:

Calls for a national catastrophe insurance program have been floated before, typically by officials in high-risk states like Florida and California. But it's hard to get people in, say, North Dakota to buy into such a system. North Dakota insurance commissioner Jim Poolman says his state isn't likely to suffer from a hurricane or a terrorist strike, and residents there don't want to subsidize people who live in riskier areas.

Mr. JIM POOLMAN (North Dakota Insurance Commissioner): We all choose where to live, and the 640,000 people in North Dakota choose to live there for a reason.

HORSLEY: But California insurance commissioner John Garamendi says taxpayers in North Dakota and throughout the country are already paying for what he calls the Air Force One insurance system.

Mr. JOHN GARAMENDI (California Insurance Commissioner): We got a disaster, Air Force One scoots in, money, or deficit, falls out the back. That's not a good way to do it.

HORSLEY: The federal government has already earmarked more than $60 billion for Hurricane Katrina relief, and that bill is expected to grow.

Garamendi and his counterparts from Florida, New York and Illinois called this week's catastrophe insurance summit meeting in hopes of designing a comprehensive system, involving homeowners, private insurance companies and the government. They're convinced it's better to collect insurance premiums before a disaster than to just open the treasury afterwards.

Robert Litan of The Brookings Institution says a well-designed national insurance system might charge high premiums to discourage building in risky areas and offer discounts in places with the most stringent building codes.

Mr. ROBERT LITAN (The Brookings Institution): If you have a plan that is risk-based, it would almost by definition encourage better building codes, better land use.

HORSLEY: There are plenty of challenges in designing such an insurance system, not least how to make people buy the policies. Fewer than one in five Californians now has earthquake insurance, and even in the most flood-prone areas, only about half the homeowners carry flood insurance. Analysts say well-intentioned federal bailouts are part of the problem. After all, why should anyone pay for catastrophe insurance if their neighbor who doesn't still gets federal relief?

State regulators will be wrestling with those and other issues today as they try to develop a consensus plan to present to Congress. North Dakota's insurance commissioner says he'll be listening and keeping an open mind.

Scott Horsley, NPR News, San Jose, California.

INSKEEP: This is MORNING EDITION from NPR News. I'm Steve Inskeep.

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