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Now, how about the federal government help pay for something taxpayers and small-business owners really need, like natural catastrophe property insurance, for instance?

Hurricanes and earthquakes are costing us a lot more than they used to, thanks to inflation, the construction of homes, condos and businesses in questionable locations, and storms that appear to be increasing in frequency and severity.

So who's going to pay for it all, insurance carriers? They could, in theory. Not unless insurance buyers, however, accept astronomical increases in premiums, which they won't stand for.

Tens of thousands of businesses all over the country, small ones in particular, already operate on slim margins. Slapping them with triple-digit increases in property/casualty premiums is just going to make their lives more difficult, their survival in doubt.

Alert readers of this magazine, of which there are plenty, will recognize that three states, California, Florida and Hawaii, have already established state programs to prepare for big catastrophes. The programs have helped insurers to continue to write business in these states, according to the National Association of Mutual Insurance Companies.

When catastrophe damages exceed the claims-paying ability of these states, they'll need our help. That's exactly what a federal backstop for natural catastrophes would ensure: that capital would be redistributed from the supply to the demand.

Isn't that the very essence of insurance? To collect premium from all Americans during quiet years to help pay for devastation afflicting some Americans in future years?

The government even has worthy precedents in the National Flood Insurance Program and the Federal Crop Insurance Program to use as a model to create a national natural catastrophe fund.

Critics of government intervention howl that bringing Uncle Sam into the mix to help pay for reimbursements is yet another subsidy. It sure is, I dare say, and a worthwhile one at that.

We can haggle over the details as to how much the federal government ought to pay, with tightwads arguing for lower amounts and spendthrifts pushing for higher amounts.

We can even talk about limiting payouts for catastrophes affecting some areas, areas like the Florida coasts, where developers have no business building high-rises and minimalls three feet from the beach. That would at least remind Floridians there's a limit to how far taxpayers in other parts of the country will subsidize construction folly.

Hell, we might even give the Florida delegation a scare or two by subsidizing everyone except Floridians. You don't agree? That's fine, but let these discussions spill over into a vigorous debate.

Please don't confuse subsidizing the reconstruction of losses suffered at the hands of natural catastrophes with subsidizing the reconstruction of losses from the idiocy of other human beings. One stems from cycles occurring in nature. The other stems from stupidity entirely manmade.

After all its citizens do for it in the form of paying taxes, the U.S. government can reciprocate by creating a fund to help pay for rebuilding in the aftermath of a natural catastrophe or two. The government redistributes enough of our wealth to subsidize others with powerful connections. What's it waiting for to help victims of these forces of nature? It is neither in the power of the U.S. government nor its people to prevent a natural disaster, though we are in a position to help mitigate such losses through strict zoning and building codes.

Natural catastrophes will batter some U.S. taxpayers more than others, and subsidizing the healing of wounded brothers in the wake of tragedy is a perfect opportunity to help those in their hour of need.

Let's not allow markets to operate freely, in this case. In this case, we should force our government to intervene on behalf of our fellow citizens.

CYRIL TUOHY is managing editor of Risk & Insurance®.

April 15, 2006

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