Washington - Americans for Smart Natural Catastrophe Policy, a national coalition of environmental, consumer, taxpayer, free market and industry organizations, urged Congress to review carefully the findings of a new economic study. The study, released by Robert Shapiro, who served as Under Secretary of Commerce for Economic Affairs in the Clinton Administration, and Aparna Mathur, a Research Fellow at the American Enterprise Institute, estimates massive new taxpayer liabilities if natural catastrophe legislation now pending in Congress is adopted.
The study, "The Economic Effects of Proposals for Federal Natural Catastrophe Reinsurance and New Loan Programs: Who Pays the Benefits?" estimates the economic burdens on individual states from Congressional legislation to provide state reinsurance loans, create a federal reinsurance backstop to cover state losses, or expand the National Flood Insurance Program (NFIP) to cover wind damage, if the U.S. Gulf Coast suffered a hurricane season comparable to that of 2005.
NFIP has already seen its share of criticism. Just last month, INN reported that the National Flood Insurance Program owes the Treasury $17 billion, according a report from the U.S. Government Accountability Office (GAO). Moreover, the report contends that program is ill equipped to meet losses in the event of a future catastrophe.
The GAO report places the blame for the program's plight on the Federal Emergency Management Association (FEMA), which administers the program. GAO accuses FEMA of being too lax with record keeping and in its oversight of contractors. "Lack of monitoring records, inconsistent applications of procedures and lack of coordination have diminished the effectiveness of monitoring of NFIP-related contracts," the report states.
Taxpayers in 20 states would be hit particularly hard by multi-billion dollar burdens under hurricane insurance legislation, the Shapiro-Mathur economic study finds. These include $19 billion for Californians, $11 billion for New Yorkers, $7 billion for Illinoisans, $6 billion for Pennsylvanians and taxpayers in New Jersey, $5 billion for those in Ohio, $4 billion each for taxpayers in Massachusetts, Michigan and Virginia, and at least $3 billion for those in Connecticut, Indiana, Maryland, Minnesota, North Carolina and Washington.
Release of the Shapiro-Mathur economic study comes in advance of the expected convening of a Congressional conference committee to resolve differences between the Senate and the House of Representatives over whether to add wind coverage to the already financially insolvent NFIP. The House voted in 2007 to add wind coverage to the NFIP. This spring, the U.S. Senate rejected such wind coverage by the resounding margin of 74-19.
Following its overwhelming rejection of adding wind coverage to the NFIP, the Senate adopted a proposal to create a national commission of experts to study natural catastrophe insurance policy and the fiscal and environmental effects of the various major legislative proposals. Americans for Smart Natural Catastrophe Policy supports the creation of such a commission and believes that the new commission's findings will mirror those of the Shapiro-Mathur report, as well as findings by research firm Towers Perrin, which predicts losses up to $200 billion if a federal program replaces private sector catastrophic wind insurance.
"We shouldn't displace productive private insurance and reinsurance industries with expensive, unworkable government programs," says Eli Lehrer, senior fellow with the Competitive Enterprise Institute, another member organization of Americans for Smart Natural Catastrophe Policy. "The House and Senate conferees on the National Flood Insurance program should take a very careful look at this study. Above all else, we need to create an insurance environment that preserves the environment and encourages safe, effective bui ding. A national catastrophe policy commission could play an important role pointing the way toward a better system for managing catastrophes."
Visit www.smartnatcat.orgto access the Shapiro-Mathur report.
Source: Americans for Smart Natural Catastrophe Policy, INN archives
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