Democrats’ platform drops support for ‘beach house bailout’
WASHINGTON (Sept. 4, 2012) — The R Street Institute today noted the Democratic Party has dropped from its 2012 platform language that advocated a federal reinsurance mechanism to subsidize state catastrophe funds.
The newly released 2012 National Platform omits a key plank that had been included in the 2008 platform calling for creation of a “National Catastrophic Insurance Fund,” similar to the Homeowners Defense Act that was co-sponsored by then-U.S. Sen. Barack Obama, D-Ill.
The proposal, which has faced opposition from a coalition of free-market, taxpayers, environmental, insurance and consumer groups, would encourage the growth of state-sponsored catastrophe funds and residual market mechanisms — which typically charge below-market rates for a host of property insurance perils — by creating a federal backstop that would guarantee the funds’ debts and obligations. In recent years, members of the Florida delegation, in particular, have sought a preemptive “beach house bailout” from the federal government should the Florida Hurricane Catastrophe Fund and the state-run Citizens Property Insurance Corp. be unable to meet their obligations.
“As a non-profit, non-partisan institution, R Street doesn’t take part in electoral politics,” said Public Affairs Director and Senior Fellow R.J. Lehmann. “It is nonetheless very encouraging to see a major American political party backing away from a proposal that would displace private insurance markets, put taxpayers on the hook for potentially enormous losses and subsidize further development of already fragile coastal ecosystems. The beach house bailout is simply bad pubic policy.”
The Democrats’ 2008 party platform pledged:
We will develop a National Catastrophic Insurance Fund to offer an affordable insurance mechanism for high-risk catastrophes that no single private insurer can cover by itself for fear of bankruptcy. This will allow states and territories to deal comprehensively with the economic dislocation of natural disasters.
More recently, California’s two senators – Barbara Boxer and Dianne Feinstein – have come together to sponsor more limited legislation that would create a similar federal fund to offer loan guarantees to state-level earthquake insurance mechanisms, like the California Earthquake Authority. Last month, R Street published analysis of the proposal finding that it cannot meet its sponsors stated goals of radically reducing the cost of or drastically increasing the take-up of earthquake insurance.
R Street is a non-profit public policy research organization that supports free markets; limited, effective government; and responsible environmental stewardship. It has headquarters in Washington, D.C. and branch offices in Tallahassee, Fla.; Austin,Texas; and Columbus, Ohio. Its website is www.redesign.rstreet.org.
