REALITY: Government proposals that transfer risk from insurers to taxpayers won’t reduce the risk or cost, but will diminish the private market and encourage further development in hazardous areas leading to increased risk and cost in the future.

• A federal fundthat sells reinsurance to state catastrophe funds concentrates all of the risk associated with natural disaster in government.  A private market diversifies this risk, spreading it globally. 

For example, for the 2005 hurricane losses, insurers retained 39% of the loss, Bermuda reinsurers 29%, US reinsurers 9%, European reinsurers 13% and Lloyds 9%.