House of Paine

why deja vu shit happens

reinsure and they will rebuild 



so the wheel turns 


When private insurers refused 
to sell insurance to homeowners
 building or living in disaster-prone areas 
along the Gulf Coast prior
 to Hurricane Katrina's devastation,
 state governments stepped into the breach.

Under political pressure 
in a region where hurricanes
 are a recurring fact of life,
 states have created their own
 insurance companies 
to write policies 
for some of the riskiest areas 
-- with premiums that are higher
 than most
 but not high enough 
to cover losses incurred in a disaster.

  
 
As a result, facing big losses 
from Hurricanes Katrina and Rita,
 state-backed insurers 
in Louisiana, Mississippi, Alabama and Texas 
are imposing surcharges
 -- up to 20 percent in Louisiana's case -- 
on other policyholders 
or their insurers to pay claims on the coast.

The surcharges have rekindled a debate over whether these 

"insurers of last resort" encourage development
 in areas where it shouldn't occur
 and  inland homeowners help pay for the claims
 of coastal dwellers.



While the National Flood Insurance Program
 is often criticized 
for enabling unwise development
 critics say state-backed insurers 
are beginning to rival it

. The federal flood program
 provides $764 billion in coverage
 on 4.7 million policies, 
while state-backed insurers 
have quietly grown to provide 
more than $400 billion in coverage
 on 1.9 million policies.

And while federal flood coverage
 is capped at $250,000 for structures
 some of the state programs are more generous. 
For instance, Texas's state-backed insurer
 provides coverage on single-family homes 
of up to $1.5 million.

 Florida's massive Citizens Property Insurance Corp.
, which insures some of the most expensive homes
 on the Gulf,
 provides unlimited coverage
 for wind-damage policies
. Efforts by some Florida legislators
 to impose a $1 million cap 
failed earlier this year.

Earlier this year, Florida Citizens' board
 asked for an assessment of 6.8 percent
 on newly written policies
 to cover a $516 million shortfall
 caused by claims following
 four major hurricanes 
that hit the state last year

 By law, insurers may recoup 
the amount from policyholders
 The one-time surcharge 
will amount to about $100 per $1,500 in premiums




if no one in the private market 
wants to insure on the coast
 because their underwriters say 
that's just not sound to do
 then that means Citizens fills that void





the Insurance Information Institute
advocates allowing private insurers
 to charge rates high enough 
to make coastal coverage profitable.



State-backed property insurance 
dates to the Housing and Urban Development Act
 of 1968

 passed in response
 to the riots of that era

 The act allowed states 
to create corporations
 known as Fair Access to Insurance Requirements
 or FAIR, plans
 to take on high-risk properties 
and to tap insurers and policyholders statewide
 in a crisis



 The exposure of state-run plans 
to windstorms ballooned to $115 billion 
by 2001
 from $17 billion in 1992


 


state-backed coastal insurance 
has been a key driver

 (along with the flood program
 ill-considered zoning laws
 and building codes 
and after-disaster relief efforts) 

 of the coastal development boom of recent years.
By law,
 most plans are required 
to charge higher-than-market rates 
so as not to compete
 with private insurers


In 2003, 15 of 27 FAIR plans 
reporting data 
posted an operating loss