New York State Could Be Better Prepared for a Major Catastrophe

The system now in place to help recover from the economic consequences of major catastrophes is an inefficient patchwork of private insurance and government programs that:

• Leaves many people and businesses unable to fully recover
• Wastes tax dollars
• Inflates insurance premiums for consumers 
• Makes it difficult for some consumers to find insurance at any price.

Insurance companies cannot effectively insure what they cannot predict. They can project how many auto accidents and house fires their customers will have in a given year, but no one could predict that terrorists would fly airplanes into the World Trade Center or that four hurricanes would strike Florida in a six-week period. The unpredictability and potentially immense cost of some catastrophic events make them essentially uninsurable.

How New York State Can Prepare for Catastrophes and Protect its Citizens

The state and the private sector should work together to develop a mechanism that will help ensure resources are available to recover from a catastrophe without irreparable damage to the state's economy. A Catastrophe Insurance Fund would provide the backstop necessary for companies to insure against catastrophic loss in a financially responsible manner that doesn't threaten their solvency or their ability to protect their customers. Catastrophe Funds and insurance companies should be able to accumulate reserves on a tax-exempt basis to pay catastrophe claims.