Insurer wants US to back coastal coverage

NEW YORK - Hartford Financial Services Group Inc., the Connecticut-based life and property insurer, is proposing a federal catastrophe program that would backstop companies selling residential coverage in coastal areas.

The proposal, advanced by chief executive Ramani Ayer, envisions a broader role for private companies in disaster-prone areas including Florida, where a state-run agency grew into the largest insurer by selling coverage at below-market prices. Ayer suggested the federal government sell coverage to insurers to protect against losses for storms worse than Hurricane Katrina, the costliest in US history.

"We do have an emerging crisis," said Ayer. "There are hidden risks society eventually pays for."

Katrina contributed to a record $57.9 billion in industry disaster claims in 2005, and caused insurers to rethink assumptions about potential losses. Hartford joined competitors including State Farm Mutual Automobile Insurance Co. and Allstate Corp., the biggest US home insurers, in retreating from some areas and seeking to raise rates. A US backstop would encourage companies to increase coastal coverage, he said.

Ayer said states, which are the primary regulators of US insurance companies, must tighten building codes and restrictions on coastal development. They should also clarify laws concerning insurance coverage to reduce disputes after catastrophic events and may need to provide subsidies to homeowners unable to afford prices that reflect the risk of damage to their houses, he said.

A Senate committee dropped a plan in October to expand the federal flood insurance program to include coverage for wind damage. Allstate has proposed its own plan for state and federal governments to absorb some risk from the largest disasters, and Travelers Cos. and Nationwide Mutual Insurance Co. offered a plan this month.