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Relief for Florida, nation
Palm Beach Post Editorial
Tuesday, May 26, 2009
As a senator, Barack Obama cosponsored legislation to create a national catastrophe insurance program. With luck, he will have a chance to sign the legislation.
The bill would create a not-for-profit consortium of states that, like Florida, have reinsurance funds for national disasters that private insurance won't cover at a realistic price. That consortium could sell bonds, backed by the federal government, to private investors for damage claims after catastrophes. States would repay the bondholders.
But more and more states are being abandoned by insurers seeking to minimize their risk. Thirty-four states, Rep. Klein says, would qualify for membership in the risk pool. He has cosponsors from 20 states, where residents worry about more than hurricanes: earthquakes, wildfires, tsunamis, mudslides and tornadoes. "This is not just a Florida issue anymore," Rep. Klein said. One cosponsor is Rep. Tom Rooney, R-Tequesta. Last fall, he defeated Tim Mahoney, who worked on the first version with Rep. Klein.
To cover those bets, insurers must buy much more private reinsurance, which is sold globally. That extra cost drives premiums much higher. If Rep. Klein's bill becomes law, the federal program would remove the need for that added private coverage.
John McCain brayed that national catastrophe insurance would cost $200 billion. In fact, Rep. Klein estimates that it would cost $25 million over four or five years to set up. The idea is to cost the Treasury nothing else, and to help homeowners in Florida and elsewhere. A national problem needs a national solution.