Never Let a Disaster Go to Waste
Copyright: | (c) 2011 Weekly Standard |
Source: | Proquest LLC |
Wordcount: | 403 |
Taking note of the calamitous natural disaster in
Quite simply, the bill sets up qualifications met only by one insurer in the country - the semi-public
Actually, however, it will cost a mint because, like any effort to insert government into property insurance markets, it cannot possibly work as advertised. Here's why: Insurers and reinsurers spread risk all over the world while government programs concentrate it. Particularly when insuring against major catastrophes, insurers - even quasi-governmental ones like CEA - buy international reinsurance that might pool the risk of, say, a
By relying on U.S. government reinsurance, however, CEA's risk will get concentrated right here. Thus, to break even, as Boxer and Feinstein promise the program will, Treasury will actually have to charge more than the private sector would for whatever backstop it provides, and the stated raison d'être for the bill will vanish. Otherwise - and this seems a lot more likely - the government will end up systematically underpricing coverage and somehow sticking taxpayers with the bill. The most similar effort currently in operation, the National Flood Insurance Program, already owes the Treasury more than
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