RAA'S FRANK NUTTER TESTIFIES AT HOUSE HEARING ON RISING INSURANCE COSTS

WASHINGTON, Nov. 3 -- The Reinsurance Association of America issued the following news release on Nov. 2, 2023:

Frank Nutter, president of the Reinsurance Association of America, testified today before the House Financial Services Committee's Subcommittee on Housing and Insurance hearing on "The Factors Influencing the High Cost of Insurance for Consumers." During his testimony, Mr. Nutter noted that at its core, insurance assesses risk and transfers individual property risk to a larger pool of insureds and capital providers--the most efficient means to provide financial recovery from property loss. But as people are increasingly living in desirable but dangerous places, losses have skyrocketed, and rates have proven inadequate.

Mr. Nutter testified that "a challenge in addressing these trends is the business model of insurance--principally a retrospective one utilizing past loss data." He further noted, "a failure to incorporate future risk assessment into insurance rates and loss mitigation dooms communities to solutions that will quickly become inadequate and subject consumers to rate shocks as risk-based rates as risk-based rates are implemented." Finally, he commented, "it undermines one of the principal roles of insurance to communicate risk via rates."

Responding to claims that reinsurers are driving the rising cost of insurance, Mr. Nutter noted that reinsurance rates are not the principal driver of the changing risk landscape, rather they reflect the underlying risk landscape and that reinsurance costs, even where significant, are among several factors such as inflation, construction costs, legal system, and claims resolution costs in consumer rates relative to other factors. He also noted that reinsurance premiums are outpaced by claims payments and expenses.

Concluding his testimony, Mr. Nutter suggested that Congress should (a) reform federal programs to incentivize people to live in resilient homes and communities; (b) increase funding for pre-disaster mitigation programs; (c) incentivize governments, through federal disaster assistance, to adopt statewide building codes and use forwardlooking risk assessment in land use; and (d) enact tax credits for pre-disaster mitigation, exempt state and local mitigation grants from federal income taxation, and encourage private sector investment in obligations of governments at all levels for resilience project, like those benefitting Community Disaster Resilience Zones (CDRZ).

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Original text here: https://www.reinsurance.org/Press_Releases/RAA_s_Frank_Nutter_Testifies_before_House_Hearing_on_High_Cost_of_Insurance_for_Consumers/