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Tuesday, Sep 19, 2017
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Irene strengthens case for national catastrophe fund

If the devastation caused by tornadoes and floods over the past year weren't enough to convince skeptical states and governors of the need for a national catastrophe fund, Hurricane Irene should be the catalyst. The storm, which missed Florida but struck North Carolina and then slowly hit the rest of the East Coast, caused widespread havoc. At least 40 people have died, and damage from flooding — especially inland — and other effects is expected to tally well into the billions of dollars. In all likelihood residents of impacted areas will soon feel what Floridians have felt many times — the sting of higher property-insurance rates from hurricanes. A national "cat" fund would help soften future blows from those and other disasters by spreading risk throughout the country, instead of leaving individual states to fend for themselves. No region is immune from natural disasters. For example, as the people of especially hard-hit Vermont now know, tropical cyclones do not strike just Florida, Louisiana and the other Southeastern coastal states. And earthquakes are not limited to California, as many Virginia residents also learned last week.
A national cat fund isn't a new concept. It would be funded by a portion of property insurance premiums already collected by companies and be allowed to grow tax-free. Officials would establish a damage "threshold," and the fund could not be tapped unless the threshold is exceeded. Former Florida Govs. Jeb Bush and Charlie Crist backed the creation of a national fund similar to the Florida Hurricane Catastrophe Fund, which was created in 1993 after Hurricane Andrew's destruction and from which insurers are required to purchase reinsurance. A few years ago, the U.S. House endorsed a national fund, but the measure died in the Senate. The U.S. Council of Mayors also has voiced its support. Still, the proposal has yet to gain traction, in part because of the false belief that a national fund would interfere with the private insurance market. But as Bush, a Republican, noted a few years ago, major disasters such as Hurricane Katrina "can overwhelm the private insurance market's ability to pay claims, and they can limit the market's ability to continue to provide needed coverage." In addition, it's not just the effects of a disaster that can wreck a local economy. Often, insurance is needed to rebuild — which is why a stable insurance market in the wake of a catastrophe is essential. A national cat fund would stabilize the insurance market, protect property owners and their investments and, if properly configured, reduce the need for taxpayers to pony up large amounts of money to help pay for damages. One needs to be established for the good of all the states and the nation's economy.
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