US to Nationalize Hurricane Insurance

Well, that's the Wall Street Journal headline and it is a bit misleading, but the stupid idea is the same.

WASHINGTON -- As hurricane season begins, Democrats in Congress want to nationalize a chunk of the insurance business that covers major storm-damage claims.

The proposal -- backed by giant insurers Allstate Corp. and State Farm Mutual Automobile Insurance Co., as well as Florida lawmakers -- focuses on "reinsurance," the policies bought by insurers themselves to protect against catastrophic losses. The proposal envisions a taxpayer-financed reinsurance program covering all 50 states, which would essentially backstop the giant insurers in case of disaster.
Link to the WSJ Article

The program could save homeowners roughly $500 apiece in annual premiums in Florida, according to an advocacy group backed by Allstate and State Farm, the largest writers of property insurance in the U.S.

But environmentalists and other critics -- including the American Insurance Association, a major trade group -- say lower premiums would more likely spur irresponsible coastal development, already a big factor in insurance costs. The program could also shift costs to taxpayers in states with fewer natural-disaster risks.

"This bill makes it a little bit too easy for the state to go to the federal government for a bailout," said Eric Goldberg, associate general counsel at the American Insurance Association, an insurers' trade group.

If we disconnect risk from action we get riskier actions.

The proposed plan is roughly analogous to the National Flood Insurance Program, which has been criticized for encouraging construction in risky floodplains. Nevertheless, in recent weeks the Senate voted to renew the flood-insurance program, and also to forgive $17 billion in disaster debt.

UGH