RE: SB 290 Natural disasters – Insurance and related alternative risk-transfer products
My name is R.J. Lehmann and I am director of finance,
insurance and trade policy at the R Street Institute. R Street is a think tank
devoted to pragmatic free-market solutions to public policy challenges. We have
maintained a Sacramento office focused on California issues since 2014.
I write you in support of S.B. 290, legislation that would
authorize the governor, insurance commissioner and treasurer to initiate
contracts that transfer the state government’s exposure natural catastrophe
risks – including costs stemming from earthquakes, wildfires and floods – through
the use of insurance, reinsurance, insurance-linked securities or alternative
risk-transfer products.
We support this measure to provide greater flexibility in
how California may prefund the state’s disaster risks, close the widening
protection gap and protect taxpayers from downside risk. In the past two years
alone, California has had to spend nearly $1 billion in emergency appropriations
to deal with firefighting, roughly double the amount budgeted. Insuring such
disasters would both smooth the impact on the state’s budget and provide
clearer price signals that can be used to evaluate cost-effective mitigation
strategies.
We thank Chairman Dodd and Insurance Commissioner Richard
Lara for their work on this important legislation and urge its passage by the
committee.
