Federal Reinsurance for Disasters. A Congressional Budget Office Study. Prepared at request of Senate Budget Committee Analyzes proposals for federal reinsurance of risks from terrorism and natural disasters Contributors included: Rade Musulin - Florida Farm Bureau Richard Roth
Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
A Congressional Budget Office Study
considered after Hurricane Andrew and Northridge Earthquake
offer reinsurance when coverage is in short supply, at market prices designed to cover governments cost
Pay for losses directly, without reimbursement or only partial reimbursement
considered for terrorism attacks after Sept. 11Two types of federal proposals to increase supply of P/C insurance after a catastrophe
would the supply of insurance rebound quickly?
Is the risk of terrorism insurable w/o government’s assistance?
Are there policies that could avoid undermining private activity while providing backstop?
What would cost be to taxpayers and government?Key consideration
Higher prices generally attract new capital
insurers reassess their risks
prices decline to levels consistent with perceived risks
Proponents contend that federal program needs to add capital to the market and then withdraw after market recoversStudy brief:
$25B for natural disaster
$100B for contingent liabilities from terrorism
subsidies could lead to fewer preventative actions
delay innovation that could increase private supplyStudy brief:
if keeps prices below costs and crowd out private markets, insurance may be more expensive in long run
issues with subsidization, reduce incentives for mitigation
Since Sept. 11, supply of terrorism coverage has grown and coverage has become less restrictiveStudy brief:
Under current proposals for federal reinsurance of terrorism risks
government initially pays for most of losses
CBO estimates that government should charge insurers about $3 billion annually to cover costsStudy brief:
offering property owners incentives to mitigate risks
reduce federal assistance after an event
changing the tax treatment of loss reserves held by insurers
limiting damage awardsStudy brief: