Government intervention in insurance placing financial burden on taxpayers

Government intervention in the insurance market is placing the financial burden of natural disasters on taxpayers, according to a Lloyd’s of London report.
“The private insurance market has a crucial role to play in helping communities and economies recover from disaster,” said Sean McGovern, director of North America at Lloyd’s, in a release.
“We need to go back to first principles and redraw the boundaries between government intervention and the private market. The cost to the U.S. taxpayer is huge and is not sustainable.”
As catastrophic losses have mounted and the U.S. economy has declined, the issue has gained more urgency, according to the report, Managing the escalating risks of Natural Catastrophes in the United States.
The report calls for greater cooperation between government, insurers and planners in the United States to ensure greater emphasis is placed on managing and mitigating risk.
Allowing a healthy private insurance market to price risk appropriately is fundamental, the report cautions. “Insurance is not sustainable if it is offered at rates below what is required by sound, risk-based actuarial practices,” McGovern said.
A better understanding of the potential costs of natural disasters to those affected – and the wider economy – needs to be developed.
“Both the insurance industry and the government need to help individuals and communities understand the steps they can take to mitigate the potential consequences of catastrophes and adapt to the future impacts of climate change,” according to a Lloyd’s release.
“This could significantly reduce the impact and costs of natural disasters.”