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Natural disasters, a budget time bomb

By Bill Emerson and Ted Stevens
Tuesday, October 31, 1995; 12:00 AM

The truly big story about Hurricane Opal, which recently swept the Gulf Coast, goes beyond the 16 dead and more than $2 billion in property damage. It is also about the warning it sends that federal disaster policy must be fixed.

Over the past five years, the cost of natural disasters has been rising at an alarming rate. In that time, 11 catastrophes have cost the nation more than $1 billion each. Hurricane Andrew and California's Northridge earthquake together cost more ($24 billion) than what the government spends annually on running the federal court system, aiding higher education and pollution control, combined.

These big dollars spell big trouble for a federal government that is struggling with a plan to balance its budget in the next seven to 10 years. The fact is that the federal government has become the nation's primary natural disaster insurer. Seventy-five percent of the victims of the Northridge quake had no seismic insurance, while 93 percent of the victims of 1993's midwestern floods lacked flood insurance. These numbers are typical of coverage in high- risk areas throughout the United States. So when disaster has come, the federal government has been expected to step in and help victims get back on their feet. Over the past five years, it has spent $500 for every taxpaying family in the nation on natural disaster assistance.

And the numbers are growing -- rapidly. Imagine in federal budget terms what the next Northridge-sized earthquake would mean if it were centered in downtown San Francisco. Estimates exceed $80 billion, enough in just one event to set budget balancing plans back by years.

Without adequate insurance available for property owners in disaster-prone areas, every natural disaster will have the potential for being a federal budget disaster. And the danger of a fiscal disaster is growing larger every day. Adequate private disaster insurance has become increasingly hard to get. The possibility of a $20-$40 billion hurricane has insurers questioning their capacity to handle claims that may be made on their current policies. Meanwhile, more Americans are living in high-risk coastal areas.

States have established insurance pools to protect residents from the disaster insurance squeeze. But far more resources are needed than state governments have available. Even before Opal struck, the two-year-old Florida disaster insurance fund was in the red, and Florida's experience is typical. A national solution is needed.

The simple fact is that if the budget wild card is to be ruled out of the fiscal game in Washington, more Americans must carry private disaster insurance -- which means that a way must be found to make adequate insurance more widely available.

That is why more than 220 members of Congress from both parties, including lead Democratic cosponsors Rep. Norm Mineta of California and Sen. Daniel Inouye of Hawaii, have joined us in a display of rare bipartisanship to support the Natural Disaster Protection Act. The bill would create a private Natural Disaster Insurance Corp., which, in partnership with insurers across the nation, would pool resources and spread risk in preparation for the large catastrophes we all know are inevitable.

The legislation would require anyone buying a home in a disaster-prone area using a federally assisted mortgage to purchase appropriate insurance coverage. Those who refuse to buy coverage would no longer be eligible for federal assistance to rebuild their homes should a natural disaster strike. The goal is to reduce the role of government and the cost to taxpayers, replacing it with a system that requires those who live in harm's way to take more personal responsibility.

For those who live in disaster-prone areas, the Natural Disaster Protection Act would be an insurance life preserver. For policy makers, it would remove a major uncertainty that haunts all budget balancing plans today. For all the country, it would be good legislation that would solve a difficult problem in a balanced, responsible way.

Oddly, its merits are its major drawback now. Almost everyone agrees that this bill is necessary, and that very lack of controversy has led to its being left on the back burner. It is time for Congress to make the earth move under its own feet and pass the Natural Disaster Protection Act.

Natural disasters can't be avoided, but future fiscal disasters can be -- and should be. Opal has given us the warning. It is up to us to hear it.

Bill Emerson is a Republican representative from Missouri. Ted Stevens is a Republican senator from Alaska.

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