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Beware of the Beach House Bailout

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Original Publication: Biloxi Sun Herald, May 29, 2013
Article Author:
May 29, 2013

Six months ago, Hurricane Sandy devastated the Mid-Atlantic and Northeast coast and, $60 billion dollars later, taxpayers continue to pay for the storm while communities are left vulnerable to the next storm. Instead of pursuing natural disaster policies that will protect lives and taxpayer dollars, some in Congress are proposing a costly federal insurance backstop that would create a "Beach House Bailout" for wealthy beach homeowners.

Last month, Rep. Albio Sires, D-N.J., reintroduced legislation that would create a federal backstop for disaster insurance, replacing private-sector reinsurance with the American taxpayer (reinsurance is purchased by insurance companies to lay off risk with large internationally diversified firms). This will shift billions of dollars of risk from the private sector to the taxpayer just to help those who have beach houses and other types of beachfront properties. Sadly communities would still be vulnerable to severe storms.

Rep. Sires' bill (HR.1101) is based on the Homeowner's Defense Act of 2007 -- a bill that would have also created a public reinsurance scheme and would have made taxpayers responsible for most insured losses -- and had the potential to cost taxpayers more than $200 billion, according to a 2008 study done by economist Robert Shapiro.

Congress wisely rejected that bill, and they should do the same with HR. 1101.

Underpriced insurance does not provide accurate information about risk, creating a subsidy to develop in risky areas -- areas that also provide natural protection from storms. This development directly harms this nation's residents and communities by eroding our natural barriers to storms and their impact.

Subsidizing insurance coverage incentivizes people to build and live in environmentally sensitive and dangerous areas. It would also exacerbate an already bad land-use situation in Florida by making it cheaper for development of coastal areas that when left in their natural state reduce storm surge and flooding while providing ancillary benefits like recreation areas and wildlife habitat.
The safety of people should be the number one priority for any federal disaster plan.

The greatest risk posed by this kind of legislation is that it does nothing to prepare and protect people and property in advance of natural disasters.

There are much more sensible ways to prepare the nation for storms like Hurricane Sandy, which is why Congress should undertake a national mitigation strategy.

Mitigation saves lives, reduces damage and is cost effective. For every dollar spent on risk-reducing measures, $4 is saved in clean up and rebuilding costs. Pre-disaster, preventative measures should be improved and included in any government disaster planning.

It is less expensive to be prepared for disasters such as Sandy before they hit than it is to rebuild after them.

It is time for Congress to promote a disaster mitigation strategy that protects lives and taxpayers over beach houses.

Authors: Steve Ellis and Joshua Saks

Steve Ellis is vice president of Taxpayers for Common Sense (steve  < at > taxpayer.net).
Joshua Saks is legislative director at the National Wildlife Federation (saks < at > nwf.org).

Original Publication URL: http://www.sunherald.com/2013/05/28/4696147/steve-ellis-and-joshua-saks-beware.html

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