From Massachusetts to Missouri, thousands of Americans in recent months have seen their homes, communities and livelihoods uprooted by ferocious tornadoes and devastating floods. In coming years, they are likely to find affordable property insurance harder to come by. This year's extraordinary spate of twisters is a reminder that there is a better way. A national catastrophic reinsurance fund would help spread risk across state lines, stockpile capital and keep insurance affordable.
Four years ago, after the busy hurricane seasons of 2004 and 2005, a national catastrophic fund seemed possible. A bipartisan group of U.S. House members — including Florida's then-Reps. Ron Klein, a Democrat, and Ginny Brown-Waite, a Republican — won overwhelming House support for a plan to create a voluntary consortium that would have provided, on a much larger scale, the kind of backstop the Florida Hurricane Catastrophe Fund has for years.
Member states would have pooled resources to provide inexpensive reinsurance to the private companies selling policies in their states, with requirements that the savings be passed on to consumers. That would have kept insurance premiums lower for consumers by spreading the risks of a disaster. It also would have established a pool of cash and ready bonding authority for after a disaster.
The plan died in the Senate, but not before it became one of the signature issues — at least in Florida — in the 2008 presidential race. As candidates criss-crossed the state, many — including then-Sen. Barack Obama and former New York City Mayor Rudy Giuliani — backed the idea. Perhaps it's because Giuliani knew his home state is a close second, behind Florida, in the amount of coastal property insured for risk from a hurricane: $2.4 billion. But as this year's tornadoes, floods and severe storms stretching from Oregon to New Jersey have shown, disasters, and not just hurricanes, can strike almost anywhere.
Critics argue that launching a new government enterprise in the midst of austere times is wrong or that a national cat fund would undermine the incentive for the private market to mitigate risk. The Republican U.S. Senate candidates in Florida said in a debate Thursday in St. Petersburg that they oppose the creation of a national cat fund, citing the cost and expressing faith in private insurers and competition. But the private insurance industry has failed to deliver accessible, affordable coverage.
Both Democrats and Republicans previously have argued that such a catastrophe fund would be a more efficient enterprise than the status quo, where the federal government becomes the de facto insurer by paying huge bailouts. U.S. Sen. Bill Nelson should continue to provide leadership on this issue, and the rest of Florida's delegation should join him. Florida's homeowners would benefit from a national catastrophe fund, but so would residents in many other states who are now reeling after natural disasters.