U.S. seeks ways to privatize insurance for flood risks
R.J. Lehmann, senior fellow at the R Street Institute, a Washington-based free-market oriented think tank, said that expanding private reinsurance’s role in public risk pools is “possible and a good idea, and it’s happening to some extent.”
He cited the California Earthquake Authority as an example of a public entity that taps the private market.
“They cede a significant part of their risk to reinsurers, and they’ve used cat bonds,” said Mr. Lehmann. He added that residual risk pools in several states, including Louisiana, Massachusetts and North Carolina have turned to the private reinsurance market. He also noted that Florida’s Citizens Property Insurance Corp., which provides coverage to Florida citizens who cannot find coverage in the private market, closed a $750 million, two-year cat bond last year.