| Natural disasters such as floods, hurricanes, and earthquakes are often considered to be "uninsurable" by the private sector. These perils are uninsurable because of adverse selection, inadequate spread of the risk, and difficulty forming accurate estimates of the loss exposure. When private insurers are unable or unwilling to provide coverage for catastrophic perils, a large segment of the population is left in a precarious position. These perils threaten not only the obvious locations of Florida, California, and Hawaii, but nearly every region in the United States. The peril may change but the associated problems are consistent across the country.; When the private sector does not provide insurance protection to the public, the state and federal government are called upon to fill the void. Lawmakers in California, Hawaii, and Florida have created elaborate programs designed to ease the market problems in those states. The federal government provides flood insurance through the National Flood Insurance Program. There are several proposals before Congress which would expand the role of the federal government.; Most government programs attempt to manage a similar problem by using a different approach. The methods used to provide the necessary coverage are influenced by regional objectives and local political pressures. The different types of government insurance programs are reviewed in this paper. The purpose of this study is to give an overview of the current methods used to insure residential property against catastrophic perils and to propose improvements. The plans are evaluated based on how well they meet desired social and political objectives. The issues pertaining to the operation and market impact of the program are also discussed. It is difficult to conclude whether a single program is "good" or "bad" because of the numerous, and sometimes contradictory, factors related to this topic. This study provides an objective framework to delineate the parameters of the choices available to public policymakers and the general public. The programs are ranked according to their compliance with stated objectives. The policymakers would be the party to assign the degree of importance to each objective. |
