Hurricane Katrina: Insurance Losses and National Capacities for Financing Disaster Risk [September 15, 2005]   [open pdf - 106KB]

"In the aftermath of Katrina, policy makers, disaster experts, and insurance companies have expressed concerns about the financial costs and challenges of recovering from Hurricane Katrina. Further, they note the potential vulnerability of the insurance industry to a future mega-catastrophic event, and raise questions about what role, if any, the federal government should play in financing catastrophe risks. [...] Although the insurance industry will likely emerge largely intact from Hurricane Katrina and is better capitalized now than ever, it simply does not have sufficient capital to fund a mega-catastrophe. This fact is not new. Insurers and financial market experts knew after Hurricane Andrew in 1992 that outside capital was needed to supplement industry capacity. Since then, new capital has entered the catastrophe insurance market. As Members of Congress explore ways to respond to Hurricane Katrina, they may be called upon to consider federal policy alternatives to build national capabilities for disaster risk management. Among measures that might be explored are various legislative proposals to pre-fund the cost of disasters with insurance or capital market instruments (risk securitization). This report will be updated as events warrant."

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CRS Report for Congress, RL33086
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