The Senate Banking, Business, Insurance and Technology Committee met March 12 and heard a nonpartisan briefing from the Griffith Insurance Education Foundation and Dr. David Kooser of East Carolina University on how insurance markets function, the role of investment and reinsurance income in insurer solvency, and options for mitigation and regulation.

The presentation, given to a committee that did not consider any bills at the hearing, emphasized that insurance supports economic activity, that property and casualty carriers have relied on investment returns to offset underwriting losses, and that global catastrophe losses and reinsurance costs are driving higher premiums and reduced market participation.

Dr. David Kooser, associate professor of risk management and insurance, opened with a broad description of the industry’s economic role. “Insurance is the grease for the economic wheels, in any kind of developed economy,” Kooser said, explaining how insurers both indemnify losses and invest large pools of premium dollars back into bonds, mortgages and equities. Kooser cited industry figures showing combined ratios above 100 in recent years, meaning insurers paid more in losses and expenses than they collected in premiums before investment income.

The briefing covered specific policy issues that have been raised in Delaware and other states. Kooser described coverage gaps for flood loss: most standard homeowner policies do not cover rising ground water and coastal or inland flood losses are typically addressed through the National Flood Insurance Program (NFIP) or the excess and surplus market. He also noted that wildfire losses and other major catastrophes affect global reinsurance markets and can raise costs for insurers writing business in Delaware.

Kooser cited recent reinsurance losses reported for major global reinsurers and provided examples to show how reinsurance pricing and availability influence local premiums and insurer market participation. “When catastrophes are on the rise globally, it will make reinsurance more expensive for insurance companies doing business in the states,” he said.

Presenters discussed mitigation steps — for example, roof ties, clips, elevated construction and other building measures — that can reduce expected losses and may be reflected in pricing. Frank Tomasello, executive director of the Griffith Foundation, said the foundation will publish research on fortified-roof programs and their post-event performance and encouraged lawmakers to consult that analysis. Tomasello said the foundation’s materials and on-demand programs are available to policymakers free of charge.

The briefing also touched on regulatory trade-offs. Kooser described the difference between allowable, risk-based discrimination in pricing (age, driving history) and unfair discrimination barred by some regulators (he cited an example of education-based rating being eliminated by one state regulator). He noted regulators can impose ceilings or limits on rate increases and that those decisions affect insurer behavior, including decisions by some carriers to exit markets when they believe rates are inadequate for the risk.

Committee members asked about next-step policy choices including whether building-code changes or public subsidies could be used to fund mitigation; Kooser said such reforms are possible but raised funding and implementation questions. He described municipal bonds or other financing as potential mechanisms to subsidize mitigation, but said the cost and political viability vary by jurisdiction. He also told the committee that for newer technological risk (for example, autonomous vehicles) “who bears the liability” remains an open question and that insurers often charge higher premiums up front when uncertainty is high.

Presenters named several national programs and regulatory bodies relevant to state action: the National Flood Insurance Program (NFIP) for many flood risks, the National Association of Insurance Commissioners (NAIC) as a source of model laws, TRIA as the federal terrorism backstop, and federal backstops such as FDIC and PBGC for banking and pension failures. Kooser also cited large reinsurance losses reported in industry coverage and press reporting as a driver of current price pressure.

There were no votes or formal committee actions related to legislation during the session; the meeting consisted of the presentation and questions. Committee staff said the presentation materials and a recording would be shared with members and interested parties.

Speakers who took part in the briefing included Frank Tomasello of the Griffith Insurance Education Foundation and Dr. David Kooser of East Carolina University; the committee chair and the state insurance commissioner were present and participated in introductions and questions. Presenters said the foundation is available to provide follow-up briefings and research to lawmakers.

The committee did not consider bills at this meeting and took no formal regulatory or legislative action. The presenters stayed after the formal time to answer additional questions.