Spread the risk - National program would lower insurance rates, recognize reality

USA Today

November 12, 2007

By Bill Nelson

It suddenly appears Congress may create a national catastrophe-assistance program to brace millions of homeowners against natural disasters — and disastrous insurance rates.

The House, by a 258-155 vote, has passed a plan by Reps. Ron Klein and Tim Mahoney, both of Florida. Now the Senate has a companion bill by Sen. Hillary Clinton and me. The bill would allow multiple states to join to help pay for each others' disaster costs and would provide them with low-interest federal loans when damages exceed the resources of state-run catastrophe funds.

Even though both bills keep the federal government out of the insurance business, President Bush is threatening a veto because, he says, it might take business away from private insurers. Other critics claim it would be a taxpayer bailout of Floridians who build where hurricanes can blow them away or Californians whose houses have been burned to cinders.

But these critics fail to see that taxpayers nationwide already are paying the staggering costs of recovery and rebuilding after natural disasters. Consider: For hurricanes Katrina, Rita and Wilma, taxpayers have put up some $94.8 billion. And there's already a federal backstop for terrorist events.

Wouldn't it be better if we also spread the risk from wind, water, wildfire and earthquake among those states facing enormous loss and, thus, lowered the cost of insuring against such calamities?

Florida and California aren't alone, after all. Recent disasters have hammered half-a-dozen states: Katrina in Louisiana, Mississippi and Alabama; hurricanes Andrew and Hugo in Florida and South Carolina; and the Northridge earthquake in California.

I can't say it much better than did Florida Gov. Charlie Crist in a recent letter to The Wall Street Journal: "While individuals must do all they can to provide for themselves, in the end, rebuilding and repairing lives and property in the wake of a major natural disaster or terrorist strike is and should be a collective American effort ... A national catastrophe fund would establish a disciplined, structured plan for what, as a simple matter of reality, will be substantial federal assistance following a major natural disaster."

Sen. Bill Nelson, D-Fla., is his state's former insurance commissioner.

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