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Meanwhile, home owners, especially those in Florida, which
Grace says is probably the riskiest spot on earth for hurricanes,
are facing skyrocketing insurance prices and reduced or no property coverage. “This has been a hot political issue in Florida
since after Andrew, and it has been a mess ever since,” said
Grace. “Had they just let the market dictate the price back then,
they would’ve had higher insurance prices in the short term, but
ultimately it would’ve created a healthy market and, more likely
than not, they wouldn’t be in the situation they are in today.”
Now insurers in Florida and other coastal areas are reassessing
their catastrophe exposures and price structures as the public
and government continue to lay blame. The quiet storm season
of 2006 has given insurers some “breathing room,” but it has not
altered long-term forecasts for continued intense storm activity.
But despite the pressure to keep the cost of insurance in these
high-risk areas down, Klein and Grace said that most likely these
areas will experience a significant market restructuring, and,
overall, residents in the coastal areas should expect to pay higher
insurance rates.
The political storm is far from over,” said Grace. But according
to their research, Klein and Grace say that while there are still a
number of issues to be worked out, market forces will continue
to push ahead and may ultimately outpace the political debate
that continues at the local and national level. The Center for Risk Management and Insurance Research was
established in 1969. The Center studies and disseminates information
on trends and issues in the broadly defined areas of insurance and risk
management. Recent studies include home owners’ insurance, insurer
insolvencies, catastrophe risk management, insurance deregulation,
international trade in insurance, derivatives, and studies of the health
insurance market nationally and in Georgia.
The Center also supports certain educational activities. Most
recently, it hosted seminars for international scholars on topics
such as Social Security and insurers’ use of derivative fi nancial
instruments. The Center is expanding its research and information
activities in a major initiative focused on restructuring of the
insurance industry and its regulation.
Robert Klein – Before starting his career at Georgia State in 1996,
Robert Klein served as the director of research for the National
Association of Insurance Commissioners. He also served as a staff
economist for the Michigan Insurance Bureau and the Michigan
Senate Fiscal Agency. He has written extensively on various topics
on insurance and insurance regulation, including the structure and
performance of insurance markets, competitive rating, catastrophe
insurance problems, urban insurance issues, workers’ compensation,
international insurance regulation, and solvency regulation.
Martin Grace – Martin Grace’s research concerning the economics
and public policy aspects of insurance regulation and taxation has
been published in various journals. He has undertaken various
studies on the effi ciency of insurance fi rms, insurance taxation,
optimal regulation of insurance in a federal system, and solvency
regulation. Grace is a former president of the Risk Theory Society
and is a current associate editor of the Journal of Risk and
Insurance. In 2002, Grace was named the James S. Kemper
Professor of Risk Management.
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