Division of Research Working Paper Abstract

97-049

COURTING DISASTER? THE TRANSFORMATION OF FEDERAL DISASTER POLICY SINCE 1803

David A. Moss

This paper examines the current state of federal disaster policy from an historical perspective. It traces the evolution of federal disaster relief since 1803, highlights a dramatic expansion after 1960, and argues that this post-1960 expansion was entirely consistent with broader trends in U.S. risk-management policy. The historical record suggests that high public expectations constitute a serious constraint on any federal policymakers interested in rationalizing disaster policy. Another key challenge of federal disaster policy involves new scientific research that calls into question traditional methods of disaster forecasting. Along with the one-two punch of Hurricane Andrew in 1992 and the Northridge earthquake in 1994, this new uncertainty has led many private insurers to exit the market for catastrophe risks. Since the federal government tends to cover a large fraction of uninsured losses, any reduction in private insurance coverage necessarily increases the federal burden. Although several reforms have been proposed (and a few of them tried) at both the state and federal levels, this paper highlights major problems associated with each of them. The paper concludes by suggesting that the French system of disaster relief, based on government reinsurance o natural catastrophe risks, may serve as a good model for U.S. disaster policy in the future.

BGIE
46 pages