Ron Paul, the Hamilcar of Presidential Candidates

[Admiral Yi]

My understanding is the private flood insurance market failed precisely because of the federal moral hazard.  People were unwilling to buy because of the expectation of being made good by the gubmint.  So the government stepped in and offered (subsidized) flood insurance, which I think is also mandatory for people living in flood plains.

[frunk]

But that says the new evidence was in their hands 4 days before the earthquake - hardly enough time to do anything. They didn't "decide" not to do anything, they simply didn't decide anything yet.

You didn't read the quote correctly.  The information on the modeling was available to the company three years before the accident, but wasn't released to the government until 4 days before.  At the government run nuclear power plant they had already started making improvements against tsunamis in 2007 based on similar modeling some of which had been done as far back as 2002.  The delay of the company in not only responding to new risk assessments but just running them in the first place was the difference.

[The Minsky Moment]

My understanding is the private flood insurance market failed precisely because of the federal moral hazard.

No it failed because of adverse selection.  the American Insurance Association did a study on the absence of insurance in the mid-1950s and concluded that from the private sector perspective, floods were uninsurable. 

[Admiral Yi]

No it failed because of adverse selection.  the American Insurance Association did a study on the absence of insurance in the mid-1950s and concluded that from the private sector perspective, floods were uninsurable.

"There is no risk that is too high, only a premium that is too low."

Lloyds of London

[crazy canuck]

"There is no risk that is too high, only a premium that is too low."

Lloyds of London

Yeah, and look where that got them.

[Admiral Yi]

Yeah, and look where that got them.

They set their premiums too low.

[crazy canuck]

Yeah, and look where that got them.

They set their premiums too low.

And that is exactly the risk when insurance companies attempt to set a premium on something that is better deemed uninsurable.

[DGuller]

I think he is right. Whether it is going to be popular with the voters is another thing, but you gotta admire the guy for saying unpopular stuff even if it costs him votes.

There is a case for helping victims of extremely unusual, impossible to predict catastrophes, but a choice to live in a flood area or a tornado country usually means you are able to get your property cheaper than in a safer place. This cost discount is offset by the cost you would incurr if you took on the property insurance - or by the risk you take if you do not. If you then expect the taxpayers to cover that risk for you in the event you are hit with a flood/tornado/earthquake, it is moral hazard in its classic form.

That is actually a good point. 

[DGuller]

There aren't really any areas not susceptible to one type of natural disaster or another.

Yes, but some areas are way more succeptible than others to one disaster or another.

[Berkut]

I have lived in several areas that are not really subject to natural disasters, at least to the extent that I have no need to carry any kind of insurance to protect against them.

Tucson/Phoenix Arizona, and now Rochester NY. Arizona literally had nothing, and upstate New York has the occasional blizzard, but even the worst blizzard is not going to destroy my house.

[The Brain]

Sweden has moose.

[DontSayBanana]

My libertarianism aside, I even think that his mandatory insurance idea could be a solution.

Already exists, at least for flood plains.  At least that's what I was taught in mechanics of property transactions.

[The Minsky Moment]

"There is no risk that is too high, only a premium that is too low."

Lloyds of London

I am telling you historical facts, you are responding with theory.  There may be ways of overcoming or ameliorating adverse selection but IRL private insurance companies either didn't think these would work or thought it too much trouble to bother.

[DGuller]

but a choice to live in a flood area or a tornado country usually means you are able to get your property cheaper than in a safer place

I agree with most of what you've said but just FYI most of the United States would qualify as "tornado country", so you can't possibly expect people to avoid living in places where tornadoes can strike.  Your reasoning is a lot more apt when applied to people insisting on living in flood plains or on a coastal barrier island in the southern US (where hurricanes strike frequently).  But I believe every state east of the Rockies is prone to tornadoes, and I think they've even happened in California.

Just because a tornado can hit most everywhere in US doesn't mean that every place is prone to them.  There are a number of states, mainly in the middle of US, that are far more prone to tornados than other states.

[Razgovory]

I was typing a post but then I realized it's you, so I am not even going to waste a single minute on "arguing" with you.

Good idea,   It is better to keep silent and be thought a fool than to speak and remove all doubt.