Officials in the White House say “no” to national cat fund.
In a rare rebuff to a proposal from a US state, a high-level official of the Bush administration has officially opposed a scheme to create a national catastrophe fund to backstop gigantic losses from future natural catastrophes.
At a Senate banking committee hearing, council of economic advisers chairman Edward Lazear said the private sector was well equipped to provide insurance for hurricanes and other natural catastrophes, and that state regulators and the federal government must allow the private market to function. “A national catastrophe risk insurance plan would likely distort rates and undermine economic incentives to mitigate risk,” he said. “It would force all taxpayers nationwide to subsidise insurance rates for the benefit of a relatively small group of people in high-risk areas.”
Florida republican senator Mel Martinez said he supported a national catastrophe fund to “expand protection and availability of property insurance to owners”. He is working with fellow Florida senator Bill Nelson to craft legislation proposing a cat fund programme at the federal level.
“The private insurance marketplace,” Chuck Chamness, president and CEO of the National
Association of Mutual Insurance Companies, told the committee, “not the federal government,
is the best vehicle to address coastal insurance issues in the US. But the federal government can play a role in efforts to reduce affordability and availability problems in coastal regions.”
American Insurance Association president Marc Racicot agreed. “There are no shortcuts to addressing these problems,” he said, “and all of us must remain committed to solutions that guarantee long-term stability in the private markets to protect our economy and, more importantly, to provide certainty to the nation’s insurance consumers.”
Straddling the political fence with ballerina ease and gravity, the National Association of
Realtors called upon the Senate to enact a comprehensive natural disaster plan that recognizes that property owners, insurers and all levels of government must work together to address the problem of available and affordable property insurance, especially in disaster-prone areas.