No, Thanks, Senator Nelson
R Street, the conservative, non-profit public policy research organization, has already jumped into this ring with fists clenched.
“This legislation is built on a faulty premise: that the federal government is needed to spread the risk of catastrophes and provide incentives to transfer risk to the private capital and reinsurance markets,” R Street Senior Fellow R.J. Lehmann said in a press statement. “In reality, private reinsurance markets actually have excess capacity for catastrophic risk, and the capital markets’ appetite can be seen by the record issuance this year of catastrophe bonds.”
What eats Lehmann up is that messing with private markets with government-run reinsurance agencies, whether at the state or federal level, violates the basic insurance principle that risks should be spread as broadly as possible. Because government-run reinsurers concentrate risks inside a single state, they either have to charge higher premiums to account for the bigger load of risks, or they have to offload the risks onto other taxpayers.
Lehmann said, “We’ve already seen what happens when the federal government gets involved in property insurance; the answer is the National Flood Insurance Program.”
The National Flood Insurance Program has $30 billion in debt it will never be able to repay.
This time around Nelson wants to combine the new version of the bill with legislation to create a National Hurricane Research Initiative. What that would do is refer the combined bill to the Senate Commerce Committee — and guess what? Nelson sits on that committee.
I agree with R Street right down the line. Nelson’s bill is bad for taxpayers, bad for the free market in any session of Congress, under any name the senator can conjure.
