La. weighs a state plan to insure against floods that ‘cannot work’
“Mr. Kennedy needs to take Insurance 101,” said Eli Lehrer, who works on flood insurance issues as president of the R Street Institute, a conservative think tank. “The idea of the state getting into the flood insurance [business] makes no sense at all. It cannot work.”
A tenet of insurance, he said, involves spreading risk among a group of policyholders who won’t suffer damages during the same disaster. That way, the rates from undamaged properties can be used to pay the claims of the smaller number of homes that were inundated.
A state program goes against that principle. Louisiana would potentially be concentrating a lot of properties that are vulnerable to storm surge and river flooding in a smaller insurance program where high-risk homes amount to a larger percentage of the exposed value, Lehrer and other insurance analysts said.
