Protecting our families now,

...before the next catastrophe strikes

By JAMES LEE WITT and JAMES M. LOY
Nashville Tennessean • July 23, 2008

James Witt, a former director of the Federal Emergency Management Agency, and Adm. James Loy, former commandant of the U.S. Coast Guard and former deputy secretary of the U.S. Department of Homeland Security, are co-chairmen of ProtectingAmerica.org.

In the early 1800s, the most forceful earthquakes to ever hit the continental United States struck 200 miles from Nashville, in New Madrid, Mo. The seismic burst that accompanied the earthquakes was several times larger than the San Francisco Earthquake of 1906.

When the New Madrid Earthquakes hit, they changed the course of the Mississippi River and reconfigured the topography across America's Midwest and heartland. The same earthquake today would devastate parts, or all, of our most important cities, Nashville among them. [Webmaster's insert: this paragraph may be overblown.]

Hurricane Katrina focused America's attention on how vulnerable we are to catastrophe. Virtually every state is vulnerable. In fact, six in 10 American families live in areas that are prone to massive natural catastrophes such as hurricanes and earthquakes.

The New Madrid fault line, which runs through Tennessee and four other states, is fragile and, in the minds of some seismologists, overdue. It will shift again; the question is when.

While there is little that we can do to control the forces of nature, there are steps that we can take to prepare our families before a catastrophe strikes; respond when a massive natural event occurs; and help repair, rebuild and recover in a catastrophe's aftermath.

What can we do?

An integrated and comprehensive program to achieve those goals has been endorsed by first-responder groups, businesses and individuals. Although the program would be financed largely by payments from insurance companies, it is even being embraced by insurers and their agents and brokers.

The program would aggregate insurer deposits into a tax-exempt fund that would also grow tax-free, year after year. These deposits and investment income would be used as a financial backstop by states that choose to set up such funds. This backstop would stand behind the traditional insurance market and provide funds for extraordinary losses incurred after massive catastrophes.

This backstop would replace some, but not all, of the coverage that these companies currently must buy in the form of "reinsurance" — a kind of insurance for insurance companies. The cost of that coverage is currently built into all insurance rates and is passed on to consumers.

Because this coverage would come from a tax-exempt and nonprofit public-private partnership, its costs would be dramatically lower. One of the nation's most respected actuary firms, Milliman Inc., prepared an analysis that has been presented to Congress showing that such a program could save American homeowners as much as $10 billion each year on their insurance bills.

A portion of each year's investment income would be dedicated, by law, to prepare families by improving building codes and take other steps to mitigate potential damage. A portion would also be set aside to improve first-responder training and equipment so that our families can be assured that rescue personnel can come to their aid when a massive natural event occurs. And, the financial backstop will ensure that we have the resources we need to rebuild our homes, our communities and our lives in the days, weeks and months following a catastrophe.