NCPA - National Center for Policy Analysis


October 10, 2007

Financial disaster has been looming off the Florida coast ever since Governor Charlie Crist socialized the state's hurricane insurance market and put Florida taxpayers on the hook for billions, says the Wall Street Journal.


  • Earlier this year, Crist signed a law making the Florida government the state's dominant insurer, but without the reserves that would be required of real insurance companies.
  • The plan will work splendidly as long as there are no hurricanes in Florida, but the state will face a difficult challenge once the inevitable storm hits.
  • Then they will have the task of prying new tax revenue out of Floridians just as they begin sifting through the rubble that used to be their homes.

Now Florida's politicians are doubling down on their mistake, by trying to make all American taxpayers subsidize insurance for Florida homeowners.   Under a bill proposed by Congressman Ron Klein (D-Fla.):

  • The U.S. Treasury would be forced to issue below-market loans to state-insurance programs, while also creating a consortium, a kind of Fannie Mae of disaster reinsurance.
  • Like Fannie, it would carry an implicit guarantee from the federal government as it issues securities in the capital markets, distorting prices as it sells subsidized reinsurance to participating states, all the while saddling taxpayers with new risks.

Transferring the risk from condo-owners in Boca to taxpayers in Syracuse does not reduce the cost of hurricane disasters, says the Journal.  We have already run this experiment with the National Flood Insurance Program, with predictable results.  When people can buy insurance at below-market rates, they tend to stay in accident-prone homes.

Source: Editorial, "The Politics of Disaster," Wall Street Journal, October 10, 2007.

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