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Congress considers hurricane bill
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Steve Chiotakis: Hurricane season officially begins on this first day of June. The national hurricane center is predicting nine to 14 named storms. Seven of those could be hurricanes. But there's also a storm brewing in the halls of Congress about the government's role in protecting vulnerable coastal communities. From the Marketplace Sustainability Desk, here's Sam Eaton.
Sam Eaton: Florida representative Ron Klein has reintroduced a bill that would stabilize rising insurance premiums in coastal areas. The bill would create a federal catastrophe fund that would kick in in the event of a major disaster like Katrina.
But Ed Hopkins with the Sierra Club says the program would essentially subsidize insurance premiums in the riskiest places.
Ed Hopkins: Insurance costs have gone up greatly in coastal regions and there's a reason for that.
Insurers think coastal properties have simply become too risky. Hopkins is part of a coalition of environmentalists and conservatives opposing the bill. Instead, they're backing an alternative proposal that would use $200 million in FEMA funds to reinforce existing homes to withstand stronger hurricanes.
I'm Sam Eaton for Marketplace.
Sam, a federal catastrophe fund may be a good idea, but the first order of business should be for the state of Florida to fix the property insurance mess they have created under Governor Crist.
The Florida Hurricane Catastrophe fund is estimated to be $18 billion short in what it needs to honor its obligations for reinsurance and Citizens. Where do you think the money will come from?
Read this article from USA Today...
http://blogs.usatoday.com/oped/2009/04/our-view-on-paying-for-disasters-...
The Florida Legislature passed a bill HB 1171 that would give Floridians the choice of purchasing an insurance policy from a large, financially stable insurer like State Farm or Allstate, but the rates would not be regulated by the state. At first glance that scares some, but the reality is that no one would be required to purchase these policies, but they would have a choice. Governor Crist is threatening to veto the bill, which would mean that the burden for financing hurricanes will be more dependent on a federal bailout.
Governor Crist has chased out most of the large insurers and made Floridians mostly dependent on a state run insurer, Citizens, and the Cat Fund, which is $18 billion short.
The rest of America is about to bailout Florida from it's mismanagement of property insurance. A national Cat fund is good, but Florida should first act responsibly on property insurance.
