Heartland Scholar: Boxer, Feinstein Earthquake Insurance Plan Is “Awful”

Published April 6, 2011

Washington, DC – March 19, 2011 – A scholar at The Heartland Institute said new “earthquake insurance affordability” legislation proffered by Sens. Barbara Boxer (D) and Dianne Feinstein (D) “is special pleading for one state and a terrible, awful idea.”

“Like all proposals to insert the government into the insurance business, this plan cannot possibly work,” said Eli Lehrer, vice president for Washington, DC operations for Heartland and national director of its Center on Finance, Insurance, and Real Estate. “Insurance works best when one spreads risk around the world. Instead of doing that, this proposal concentrates risk with U.S. taxpayers and makes them pay extra.

“The senators’ plan will waste taxpayer money, encourage unwise development and, no matter what reassuring promises they make, drive up the national debt,” Lehrer said.

The bill, announced March 18, would offer federal loan guarantees to the California Earthquake Authority (CEA). CEA, which provides most of California’s earthquake insurance, was established by statute but is required to purchase private reinsurance to cover all of its liabilities. Under the Boxer/Feinstein proposal, CAE would use taxpayer money to replace that private coverage.

Since no other state administers an entity that complies with the bill’s eligibility requirements, CEA would be the only entity in the country eligible for this new form of taxpayer largess.

Lehrer can be reached for additional comment at 202-615-0586 or [email protected].

The Heartland Institute is a 27-year-old national nonprofit organization with offices in Chicago, Washington, DC, Tallahassee, Florida, and Austin, Texas. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site at http://www.heartland.org or call 312/377-4000.