An entire Chapter of the Economic Report of the President on Cats….
Here are the conclusions from Chapter 5.
In insurance markets, as in other markets, prices affect the way people weigh costs and benefits. Insurance prices that are artificially low can discourage people from adequately protecting against future losses. For example, subsidized property insurance prices may stimulate excessive building in high-risk areas, potentially driving up future government disaster relief spending.
Government intervention in insurance markets can have unintended consequences such as limiting the availability of insurance offered by private firms.
Private insurers manage catastrophe losses by being selective about which risks to insure, by designing insurance contracts to provide incentives for risk-reducing behavior, and by charging prices that are high enough to enable them to diversify risk over time or transfer risk to third parties. By adopting private sector risk management and pricing practices, government insurance programs could reduce the burden they impose on taxpayers and minimize negative effects on private insurance markets.