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Comments before the National Conference of Insurance Legislators
As Prepared for Delivery
New York, New York
Senior Fellow, The Competitive Enterprise Institute
There’s no other way to put it. The proposal before you has serious, irremediable flaws. Let me go over four of them of them very briefly:
It’s expensive: Government does a poor job managing risks. Simple portfolio theory strongly suggests that a single-country reinsurer—no matter how well run—will need to charge more than internationally focused private reinsurers simply to break even. The only way such a program can accomplish anything is if taxpayers pay most of the bills.
It’s discriminatory: Unless you are from Florida, a national backstop will bring little or no benefit to your state. Florida has most of America’s coastal exposure. It has problems with insurance largely because the governor and both parties in the legislature have done the wrong things. The American public should not bail out one state.
It will not keep down rates: Florida’s catastrophe fund has not significantly kept down private market rates there. A federal equivalent will not work any better.
It will hurt the environment: In the end, this is a massive subsidy for developers. It will encourage them to build in areas—many of them environmentally sensitive—where they would not otherwise build. This will destroy wildlife habitat and areas of great natural beauty. And, when storms come, taxpayers will pay the rebuilding costs.
The United States Senate overwhelmingly rejected the concepts embodied here. This resolution does not serve the national interest and it does not serve the Common Good. I urge you to oppose it.