Sandy Prompts Call for National Catastrophe Fund
November 5, 2012
According to a recent Sarasota Herald-Tribune editorial, Hurricane Sandy's collision with a cold front and its potential for disaster should prompt government officials to consider creating a national catastrophe fund as large-scale weather events can cause extensive and expensive reconstruction challenges.
As the private insurance market continues to reduce its exposure to windstorms and other disasters and more Americans look for insurance protection, it is unclear how long insurance coverage from the private market will remain a viable option for natural catastrophes. The Insurance Information Institute says about 14 percent of homeowners in the Northeast have flood insurance, up from 5 percent in August 2011 and higher than the national rate of 13 percent. However, the paper notes that is lower than the 33 percent of Florida homeowners with flood insurance.
Hurricane Sandy is expected to cause about $20 billion in damages, with insured losses of about $7 billion, according to EQECAT. Given the current debts facing cities and states, as well as the debt of the National Flood Insurance Program, it is unclear how reconstruction will be funded. But the editorial suggests that a national catastrophe fund with private sector investments could provide the capital necessary to recover from these disasters. Supporters of a national catastrophe fund say it could be publicly administered, operate on a tax-exempt and nonprofit basis, and require private insurers to fund it.
"Time for National Catastrophe Fund," Sarasota Herald-Tribune (FL) (Nov. 1, 2012)
© Copyright Information Inc., 2012
Updated: May 17, 2021