‘Beachhouse Bailout’ Bill Reintroduced in Congress
R Street Senior Fellow R.J. Lehmann says shifting liabilities from state-run insurance programs to the federal government would violate basic principles of insurance. Furthermore, he says, private reinsurance markets – which provide insurance to cover claims paid by primary insurance companies – can handle catastrophe risks at market-based, actuarially sound rates.
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Federal catastrophe fund supporters claim they would require participating state-run insurance programs to charge actuarially sound rates, but Lehmann notes if state-run insurers were charging proper rates, they would not need a federal bailout.
“We’ve already seen what happens when the federal government gets involved in property insurance. The answer is the National Flood Insurance Program, which has $30 billion in debt it will never be able to repay,” Lehmann says.