Sun Sentinel Palm Beach Edition
US must pool resources in response to disasters
Many Floridians had to blanch when Republican presidential candidate Vivek Ramaswamy called climate change a “hoax” in a recent debate.
Naturally, it got a big response from the audience. But for anyone paying the least bit of attention, this debate is settled. And though Florida is on the front lines, other states are also being lashed by the fury of climate-related natural disasters.
These global changes must spark a revolution in how we occupy this planet. They also bring on a newfound realization that the only way to shoulder the fiscal burden of climate change is to share it nationwide.
It’s past time for a national catastrophic fund.
Pooling emergency resources
Catastrophic funds are an esoteric concept even for Floridians whose daily lives and budgets are impacted by skyrocketing property insurance rates and the increasing threat of devastating windstorms, with surges that carve away coastline and flooding that impacts inland areas in new ways.
The basic concept of insurance is the sharing of risk.
Florida’s problems with its insurance market would be a lot worse without the Florida Hurricane Catastrophe Fund or “CAT” fund, formed after Hurricane Andrew in 1993 to stabilize the market. The fund provides a backstop known as reinsurance that covers property insurers when a massive amount of claims pour in after a large natural disaster. This reduces the amount of reinsurance that companies must buy on the private market and, at least theoretically, holds down rates. The CAT fund draws money from an array of sources, but ultimately, it’s backed by taxpayers.
It hasn’t worked as well as it should because insurers have warped Florida’s market to isolate risk here, while profits are often exported to out-of-town investors and corporate motherships. That allows companies to drive up rates while claiming the need for state-backed support.
That might leave residents of states such as Wyoming, Illinois and Arizona wondering why they should import Florida’s problems with an often out-of-control insurance industry. But it would be much harder for insurers to divide and conquer if there were one fund that all insurance companies could tap into, along with rules to access that funding.
We’re in it together
Just last weekend, Southern Californians saw their first tropical storm in eight decades, and while Floridians may have snickered at their panic, that quickly morphed into concern as Tropical Storm Hilary blew into a powerful hurricane, and the reality of that much rain falling on normally parched ground became clearer. Then the earthquakes started. Fortunately, Hilary’s impact wasn’t nearly
as bad as it could have been — though it did coin the term “hurri-quake.” But that’s not the only extreme weather event this country has experienced recently. Consider the “bomb cyclone” that brought freezing temperatures and knocked out electric service to more than 1.4 million Americans in December. Some communities around St. Louis flooded several times last year. Wildfire seasons have grown longer and more intense across the nation, particularly west of the Mississippi.
Worst of all were the harrowing wildfires in Hawaii, which devoured thousands of homes in hours, with a death toll still not settled. Floridians know what that’s like from the heartbreaking search for bodies following Hurricane Ian.
For states that haven’t faced a natural disaster at least once in recent years, it may be only a matter of time. Americans are seeing increasing signs of trouble in extreme heat events, increased heavier rainfalls and flooding in some parts of the nation, and devastating droughts and localized wildfires in others.
Ramaswamy should check out the climate change page of his home city, Cincinnati, which notes that the city “has seen almost a 40% increase in the amount of precipitation falling in very heavy rain events since the 1950s.”
Let market help
More states are calling for federal help through FEMA, the Federal Emergency Management Agency. That spreads the cost to all taxpayers, but it also slows the response and creates an uncontrollable drain on the federal budget.
A catastrophic fund, funded by small surcharges on individual policies (yes, your rates would rise slightly) would give residents and communities more control over individual response to extreme weather events. And it would provide better leverage against the rapacious tendencies of some insurance companies, which have been caught denying valid claims in Florida while lobbying our Legislature to strip consumer protections from customers.
Creation of a national catastrophic fund gained momentum following 2004’s devastating four-storm hit on Florida, plus Katrina and Rita in 2005. The U.S. House was favorable to the idea, but the Senate didn’t go along, and it fizzled.
The time is ripe to revive it. Whether or not politicians believe in manmade climate change, they can’t argue with a market-based solution that could reduce the billions pouring out of FEMA with every disaster declaration, and help keep insurance companies on the straight and narrow.