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Reinsurance Doesn't Help Us

The incentive to invest in mitigation or increase rates is not there.

Pain many times is the motivator to change behaviors. It can be physical pain or in the case of disasters, financial pain. Suffer enough damage or have recurring disasters and people will change behaviors. 

Emergency managers, myself included, often have looked to and sought partnerships with the insurance industry in general and individual companies in particular. The concept being that these companies are the ones that suffer the losses from disasters and therefore have a self-interest in reducing the cost of disasters or recovering some of their investment by higher premiums, which might motivate people to not build in future areas prone to disasters.

Unfortunately, even billion-dollar disasters — and we've had many of them at this point — are not motivators for insurance companies to be an ally to what we would like to accomplish. As was pointed out recently in a workshop I attended, insurance companies can purchase reinsurance from other firms to cover their catastrophic losses. Thus the pain point that might motivate them to change behaviors and their business plan is not there. 

Multi-billion-dollar disasters can "help" in the above. The states of Florida and California have each had to step in to back hurricane insurance and earthquake insurance for their states. Although, I don't know if state-backed insurance actually helps with disaster mitigation and subsidizing people's risk-taking.

Eric Holdeman is a contributing writer for Emergency Management magazine and is the former director of the King County, Wash., Office of Emergency Management.