22 February 2007

Forget Nevada; Florida is the gambling capital of this country.

Radley Balko of the libertarian Reason magazine's excellent Hit & Run blog offers a post concerning the Florida hurricane insurance boondoggle I've written about previously (see here and here):
Residents of hurricane-battered Florida are facing soaring insurance premiums. Some, in fact, can't afford any insurance at all. Smart people might interpret this as the market's way of saying, "Hey, dumbass. It isn't safe to live here. Better to look elsewhere."

But not Florida lawmakers. They've just signed on to a bill that would artificially lower insurance premiums by backing coverage with guarantees from state coffers. Unfortunately, it's money the state doesn't have. The bill guarantees $32 billion in relief from the state's "catastrophe fund" should (read: when) a major hurricane again hits Florida. Currently, the fund contains . . . less than $1 billion.
Since neither the state's catastrophe fund nor the state-chartered insurance company has anywhere near enough money on hand to pay the claims they may now be required to pay after a major hurricane, the measure is considered a gamble, even by proponents.

"We all need to pray to the hurricane gods," said state Sen. Steven Geller, who represents this beachfront condo city and negotiated a portion of the bill. "Yes, we're taking a risk. But what were our options?"

. . . .

"If I wanted to gamble -- personally, I don't even buy lottery tickets -- and I'm pulling money out of my own pocket, that's one thing. But taking money out of someone else's pocket with the force of law is just irresponsible," said state Rep. Don Brown, the chairman of the insurance committee, who cast one of only two votes in the Florida House against the measure. "It's the most irresponsible measure that I ever was asked to vote on."
. . . .

Remove all market incentives to steer clear of areas prone to natural disaster. Bail out victims with taxpayer dollars when entirely foreseeable disaster inevitably hits. Lather. Rinse. Repeat.

This is how government creates catastrophe.

Balko doesn't cite the source of the article he quotes, but I've not seen a better capsule summary of this epic financial disaster waiting to happen. Opponents and proponents alike recognize this as nothing less than a pure gamble. To summarize the justifications, these seem to be "South Florida is a lovely place to live, so long as your house remains there, and justifiably high insurance premiums ruin an otherwise pleasant day at the beach." and "We're praying so that it'll all work out and, even if God isn't on our side, the federal government will be (God doesn't need our votes, after all!) and we'll be saved from our own stupidity when the time comes."

There's not much doubt that a major hurricane will hit Florida in the next year or two, causing billions of dollars in damages when the insurance pool is egregiously underfunded. The real question is, when that happens, whether I will feel almost no sympathy for the people of Florida
or exactly no sympathy for them.

UPDATE: According to a post by Walter Olson at the PointofLaw Forum blog, the source of Balko's article is the Washington Post.

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