Posted On: August 6, 2007, 1:49 pm CDT

Posted By: Actuary

If this proposal ends up with private investors offering the CAT coverage at market determined prices, how is that going to save money? Why would those prices be materially lower than those offered by the current re-insurance marketplace (which can also issue CAT bonds).

I don't see the efficiency gains here. If the prices quoted to the CAT fund by investors are greater than the governments think available, how will they pass that cost back to consumers? How do they decide how the cost is allocated?

It seems to me that just deregulating pricing of the insurance industry would accomplish much of the same only more efficiently and cheaply. That has been the whole root cause of this problem as government suppression and cross-subsidization of rates has encourages construction in risky areas.