Out of the Storm News
December 3, 2013
The Honorable John Boehner
United States House of Representatives
The Honorable Nancy Pelosi
United States House of Representatives
Dear Speaker Boehner and Minority Leader Pelosi:
The broad-ranging group of undersigned industries and main street American businesses, responsible for tens of millions of U.S. jobs and hundreds of billions of dollars in economic activity, support passage of the Innovation Act of 2013 (H.R. 3309). We believe this legislation aims to address the widespread abuses of the legal system by certain patent assertion entities, commonly referred to as patent trolls.
During this time of economic need, we believe enactment of H.R. 3309 is integral to curbing frivolous and costly patent litigation that currently hinders our ability to innovate, create jobs and promote positive economic growth. Such frivolous lawsuits by patent trolls are an expensive distraction for many diverse, mainstream American industries, and the staggering growth of patent troll activity in recent years has caused our businesses to receive thousands of threatening demand letters and forced more than 7,000 lawsuits (a 400% increase since 2006), costing the U.S. economy more than $80 billion in 2011 alone.
Simply, patent trolls do not innovate, create jobs or promote economic growth. Our businesses do.
To make clear, patent trolls no longer only threaten large technology companies. In 2012, patent trolls filed more lawsuits against small and medium-sized non-tech businesses than against tech companies. The many targets of this abuse, ranging from food providers, retail stores and media companies to financial institutions, hotels, gaming entertainment companies and other industries that drive the U.S. economy, have been left with no choice but to defend themselves through inefficient and burdensome processes, rarely avoiding costly litigation. We believe American businesses must be able to defend against these consequential attacks more efficiently and less expensively.
While we recognize there may be no single solution that addresses all complexities surrounding our nation’s patent process, but one thing is clear: The Innovation Act of 2013 has significant bipartisan support on Capitol Hill and throughout many sectors, small and large, of the American business community. This broad support and willingness to work together is a true testament to its importance and we urge House passage of H.R. 3309.
Alliance of Automobile Manufacturers
American Association of Advertising Agencies
American Gaming Association
American Hotel & Lodging Association
Coalition for Patent Fairness
Competitive Carriers Association
Footwear Distributors & Retailers of America
International Franchise Association
MPA – The Association of Magazine Media
National Association of Broadcasters
National Restaurant Association
Newspaper Association of America
Online Publishers Association
Printing Industries of America
The R Street Institute
U.S. Travel Association
CC: The Honorable Eric Cantor
The Honorable Steny Hoyer
The Honorable Kevin McCarthy
The Honorable Jim Clyburn
The Honorable Bob Goodlatte
The Honorable John Conyers
The Honorable John Kline
The Honorable George Miller
The Honorable Fred Upton
The Honorable Henry Waxman
The Honorable Jeb Hensarling
The Honorable Maxine Waters
The Honorable Sam Graves
The Honorable Nydia Velazquez
The Honorable Bill Shuster
The Honorable Nick Rahall
The Honorable Dave Camp
The Honorable Sandy Levin
In mid-2013, three years after the Dodd-Frank Act’s passage, American International Group Inc. and Prudential Financial Inc. became the first insurance companies to be designated by the Financial Stability Oversight Council as non-bank financial companies that were nonetheless “systemically important financial institutions.” MetLife Inc., which had been regulated as a bank holding company prior to divesting all of its banking operations, is widely expected to become the third.
FSOC is the “college of regulators” created by Dodd-Frank and granted broad powers under the law to police systemic risk in the financial system, including heightened government scrutiny of designated firms. In conjunction with a similar designation process currently underway internationally by the G-20 countries, in consultation with the International Association of Insurance Supervisors, the move by FSOC made clear that the business of insurance – in the United States, historically regulated at the state level –would be treated as a potential source of risk to the broader financial system.
This sea change has caused considerable consternation among industry leaders, who understandably fear both draconian regulatory oversight and the imposition of bank-centric rules that do not fit the needs and challenges of insurance markets. The property/casualty industry has been particularly adamant that their sector is not a source of systemic risk and that P&C insurers should not come under the rubric of any systemic risk regulatory regime.
While it is true that the business of P&C insurance is not generally systemically risky, there have been notable exceptions where the excessive concentration of insured or insurable P&C risks has threatened the broader economy. At the same time, regulators continue to pay insufficient attention to some genuine sources of systemic risk: namely, the accumulation of excessive insurable property/casualty risks within some state and federal enterprises.
This paper takes a look at some of those hidden, heretofore unquantified risks, with particular attention to the ways U.S. taxpayers are exposed to risks that should properly be borne by the global insurance industry.
WASHINGTON (Dec. 3, 2013) – Natural disasters pose significant threats to taxpayers and the economy at-large, thanks to trillions of dollars of insurable risk concentrated on the balance sheets of state and federal government entities, a new paper from the R Street Institute argues.
Authored by R Street Senior Fellow R.J. Lehmann, the paper first examines the growth of residual insurance markets at the state level, where total exposure to loss has surged from $54.7 billion in 1990 to $818.1 billion in 2012—an increase of 1,396 percent.
“Funding sources for these exposures within the plans have not grown at this pace,” Lehmann writes. “There is currently no regulatory oversight of the broader systemic risk these plans pose to insurance markets, financial markets, homeowners or consumers more broadly.”
The paper focuses specific attention on Florida, where a state-sponsored insurer, a state-sponsored reinsurer and the state’s insurance guaranty association all would, in the event of a sufficiently bad hurricane season, rely heavily for funding on market-share based assessments on what would at that point be a weakened private insurance market.
“While these assessments can be made over time, and states have latitude to exempt particularly troubled insurers from undue assessments, this interconnected nexus of assessments raises the risk of ‘cascading insolvencies,’ as a smaller and smaller assessable base of private insurers to bear the burden of larger and larger shortfalls,” Lehmann wrote.
The paper also examines the roughly $130 billion of uninsured earthquake risk absorbed by the Government-Sponsored Enterprises – Fannie Mae and Freddie Mac. While loans bought or secured by the GSEs are required to maintain property insurance coverage for most standard perils— including flood, fire, windstorm and hail — due to a unilateral loophole, the GSEs do not require insurance for earthquake risks.
“For the GSEs, the result is that, in the event of a major earthquake, there would be no insurance to recover on most of the properties that serve as security for the mortgages held by Fannie and Freddie,” Lehmann wrote. “The USGS estimates a 7.8 southern California quake on the San Andreas Fault could produce $200 billion in damage, and much of that would be uninsured.”
Read the full paper here:
In 1890, two of America’s leading legal minds, Louis Brandeis and Samuel Warren, published an article called “The Right to Privacy” in the Harvard Law Review. Scandalized by the rise of a gossip-mongering press that intruded on the lives of prominent citizens, they called upon the courts to recognize a “right to privacy.” Their fear was that new technological and commercial innovations — in this case photography and the mass-circulation gossip rag — would cause the rich and famous untold mental pain and distress. As Stewart Baker observes in his provocative book Skating on Stilts, the substance of Brandeis and Warren’s argument now seems rather quaint, as a gossipy news media has become a central part of our public life. In Baker’s telling, “the right to privacy was born as a reactionary defense of the status quo.” And even now, he argues, privacy campaigners often overreact against new technologies they fear but do not understand.
Baker’s argument has been panned in civil libertarian circles. When he suggests that societies eventually adapt to new technologies — that “the raw spot grows callous” as we grow accustomed to invasions of privacy — privacy campaigners reply that it is Baker who has grown callous to the harms in question. Baker’s central goal is to convince Americans to accept that government must use new technological tools, like the data mining programs used by the National Security Agency, to combat mass-casualty terrorism. His critics maintain that he is far too glib about the potential that government might abuse these new tools, and indeed too dismissive of the notion that it has already done so.
I’m torn on the question of whether the national security state has overstepped its bounds, and there are people I respect on both sides of the debate. Civil libertarians like Ben Wizner of the American Civil Liberties Union and Julian Sanchez of the Cato Institute see the new Leahy-Sensenbrenner USA FREEDOM Act– which would end the dragnet collection of Americans’ phone records under the PATRIOT Act, and limit other surveillance — as an important step towards reining in a bureaucracy run amok. Baker fears that it will cripple the ability of U.S. intelligence officials to prevent future terror attacks. I couldn’t tell you which side is closer to the mark.
What is increasingly clear to me, however, is that privacy concerns are limiting our ability to flourish as a society for reasons having nothing to do with NSA surveillance.
The Food and Drug Administration recently ordered one of America’s most popular consumer genonics firms, 23andMe, to cease selling and marketing its direct-to-consumer DNA test on the grounds that it is a medical device subject to FDA approval. The FDA’s case seems pretty flimsy. The saliva collection kit that 23andMe offers through its Personal Genome Service is utterly harmless, and no one is claiming otherwise. Rather, the FDA is concerned that by giving its consumers data on disease risks, complete with plenty of disclaimers, it may prompt them to seek unnecessary MRIs and mastectomies, as Christina Farr of VentureBeat reports. The obvious rejoinder to these concerns is that consumers don’t have the option, for better or for worse, of operating on themselves. They generally need a medical practitioner to sign off, and medical practitioners hardly suffer from a lack of licensing and regulation. The FDA seems to be engaging in a senseless power grab.
The reason this matters is that 23andMe represents just the first step of the coming consumer genomics revolution. Recently, Razib Khan and David Mittelman outlined the future of consumer genomics in a short article in Genome Biology. First, Khan and Mittelman expect that startups like 23andMe, which offer consumers basic information about their ancestry and genealogy, to grow more popular as the costs of their DNA tests continue to plummet. Then these vast databases will be used to yield real scientific insights, as biomarkers record how we respond to the food we eat and the activities we undertake, and this data “is intersected with millions with varying levels of genetic relatedness and lifestyle.” The result will be “a perpetual stream of novel insightful predictions,” and Khan and Mittelman see this future as all but inevitable. Yet for this future to become a reality, consumers will have to grow more comfortable with sharing their personal medical data. One of the reasons Americans are so sensitive about sharing this data is that many of them fear becoming uninsurable, a fear that universal coverage will (hopefully) do much to allay. If privacy concerns win the day, the marriage of big data and personal genomics might never come to pass — and our best hope for achieving medical breakthroughs in the decades to come will be dashed.
It’s not just a desire for medical privacy that’s getting in the way of progress. U.S. higher education institutions have fought tooth and nail against efforts to build a unified database of “student unit records” — collected throughout a student’s educational life, and anonymized – that can allow taxpayers, parents and students to see how different kinds of students have fared at different colleges and universities. As Kevin Carey, director of education policy at the New America Foundation, has argued, higher education institutions understand that if this data is released, the federal government can hold them accountable for their performance. For example, a student unit record system will reveal which schools do the best and worst job of educating low-income students who receive Pell Grants. This is a prospect that keeps higher education administrators up at night, and with good reason, as it threatens the flow of federal dollars to subpar educational programs.
So how do the higher education institutions get away with keeping Americans in the dark about how well they are educating U.S. students? It’s simple. Critics of a federal student unit record system warn that it represents a threat to student privacy — determined sleuths might be able to figure out the grades and household income levels of individual students, despite efforts to anonymize the data. And though there are many techniques schools and governments can use to protect privacy, it really is true that data anonymization is a hard problem to solve. The question is whether we should put privacy ahead of the goal of building a more efficient and equitable higher education system.
Privacy matters. But so do the things we give up when we let the fear of invasions of privacy stymie the development of promising new technologies.
Worth considering in this discussion: Eli Lehrer, founder of the conservative R Street Institute, and formerly of the climate denialist Heartland Institute, broke with his colleagues a few years ago, for, among other reasons, his misgivings about the denial of science among right wing “think” tank colleagues. Lehrer’s special expertise is on the insurance industry.
Free-market groups on Monday urged banking regulators to create a path for surplus lines insurers to provide flood coverage on mortgaged property and to set up protections against flood policies that offer little or no coverage.
The R Street Institute, National Taxpayers Union and American Consumer Institute put forward the suggestions in a letter to the Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., Federal Reserve Board, National Credit Union Administration and Farm Credit Administration.
What would you think if someone knocked on your door one day and threatened to sue you for the way you made your to-do lists? That’s what patent trolls do, and they’re costing us $29 billion a year. The good news is that House Republicans, led by House Judiciary Chairman Bob Goodlatte, R-Va., have taken the first step to stop them.
Patents play a legitimate role in our economy, giving innovators the incentive and the breathing room to develop new medicines, technologies and products that improve all of our lives. They’re so important, in fact, that the Founding Fathers placed patent protection within the Constitution itself, under Article One, Section 8:
The Congress shall have power … To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries;
As you can imagine, however, there is a very large “but” inserted in here.
These are the patent trolls. They own patents, but don’t really make anything. They sue anyone–including small and medium-sized businesses who don’t have the resources to fight back–who might even potentially infringe on their “inventions.” In 92% of cases brought to court, they lose, but most companies simply settle because they can’t afford to fight. Many of these patents are so broad and abstract, they could cover just about anything.
For example, US Patent #6128617: “Data display software with actions and links integrated with information.” More specifically, it covers “A hierarchical graphical listing or chart rendered on a display”. Ever used the Start menu on Windows? That’s so banal any software developer could be sued. Or Patent #7103380: “Wireless Handset Communication System: A small light weight modular microcomputer-based computer and communications systems, designed for both portability and desktop uses.” (The owner of that patent, NetAirus Technologies, was just defeated by Apple last week.)
Many of these are “covered business method” (CBM) patents, and under legislation passed a few years ago, they could undergo a review process to determine if they were legitimate–though only if they fell within the financial sector. Patent reform was severely limited.
Fortunately, Chairman Goodlatte introduced a bill earlier this year to stem the patent troll tide. His Innovation Act would first shift legal fees to the losers of court battles, which would usually be the trolls. It would also expand the CBM review to cover non-financial patents, such as software patents (including those covering “chart rendered on a display.”)
Unfortunately, the bill was diluted somewhat. The fee-shifting provision was watered down, and the committee was pressured by lobbyists to drop the expansion of the review program. Instead of a detailed examination of a patent and whether or not it is legitimate, there will be a far more limited study of the patent, but without much teeth. This means that patent trolls will still be able to subject thousands of American businesses to costly legal battles over how they receive phone calls (or if they have an online shopping cart.)
Businesses that employ average Americans will still be open to malicious attacks costing them thousands or even millions of dollars. That’s money that could be spent on filling another job and employing another person, but must go empty instead.
The bill has just passed the Judiciary Committee; it will now go before the full House for a vote, and likely it will be modified further. If it is not watered down, the Innovation Act will at least be a first step. If it can be strengthened, it can put a stop to this harassment and return businesses and innovators to their main role: making goods and services that make us all better off.
We don’t like people harassing us. So why do we let it happen in the world of patents?This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Spend any time at a gathering of conservative thinkers, and soon enough, the conversation will turn, like clockwork, to the idea that conservatism needs to remain a “three legged stool” if it is to stand. Those three “legs” are usually conceived as a strong national defense, a rear-guard action against social permissiveness and a preference for free-market economics. Believers in this system tell their listeners – frantically – that an attack on any of these three legs is an attack on the whole, and that therefore even conservatives disposed to agree with only one or two of the “legs” are obliged to hold up the third.
Apparently, Pope Francis hasn’t read the memo for some time. Indeed, the pope himself seems to have made a habit of challenging two of the three legs, or at least is portrayed as having done so by the press. And while neither the pope’s seemingly permissive quotes on abortion and gay marriage, nor his extended and rather tendentious denunciation of capitalism, are at all out of step with previous popes, all the same, these two bits of pontification (no pun intended) seem to have served as a means by which to illuminate all the fault lines within the supposedly inviolate three-legged stool.
After all, one can surely imagine that many libertarians, upon hearing the pope’s comments on abortion and gay marriage, came close to celebrating in the streets. “Finally,” they would say, “the pope has come round to the 21st century where these needlessly retrograde areas of emphasis are concerned.” By contrast, naturally, social conservatives bemoaned the remarks and wondered if the church was dying.
Flash forward to the pope’s comments on the free market, and the roles are completely reversed. Now it is libertarians denouncing the pope as an ideological enemy, and social conservatives remarking mildly on how “we really could learn a lot from this.”
If this sounds like the usual ideological wrangling to you, then you’ve probably missed at least part of conservative history. After all, libertarians and traditionalists have been at each others’ throats since the 1950s and 1960s, but not over the same things. William F. Buckley, for instance, who tried to straddle the line between the two, issued a denunciation of the similarly anti-market church encyclical “Mater et Magistra,” titled “Mater Si, Magistra No.” Buckley later walked back the more strident bits with this eerily prescient phrase:
The editorial in question spoke not one word of criticism of the intrinsic merit of Mater et Magistra. Our disappointment was confined to the matter of emphasis, and timing, and by implication, to the document’s exploitability by the enemies of Christendom, a premonition rapidly confirmed by the Encyclical’s obscene cooption by such declared enemies of the spiritual order as the New Statesman and the Manchester Guardian, which hailed the conversion of the pope to socialism!
However you slice it, this is a long way from the sort of wrangling that Pope Francis’ remarks have provoked.
Now, to be clear, I stand as usual firmly on the libertarian side of this, though I am more alarmed that parts of the conservative press seems to be willing to stand with him than I am at what the pope actually said, which seems to be in keeping with church doctrine going back to…well, “Mater et Magistra.” Moreover, not being Catholic myself, I admit to not understanding what all the fuss is about. Yes, Pope Francis is the head of the Catholic Church, and Catholics are a vibrant group within the United States, albeit one that is experiencing record levels of demographic decline with young people. But surely any church that still includes both Nancy Pelosi and Paul Ryan is simply too ideologically diverse to have its vote commanded by a single man, no matter how important his title. Are there not bigger things to worry about, like the equally alarming demographic decline that Republicans are facing?
That being said, if the three-legged stool is going to fracture (and it looks more ready to do so at this stage than at any other), and if libertarians do end up supplanting it, then the pope’s encyclical should be considered a warning sign about the degree to which dogmatism can cloud a libertarian message, and the degree to which libertarianism itself could become an electoral liability, if it fails to make a case for capitalism that responds to the lived experience of voters.
A little data is necessary. While I’m fond of pointing at copious polls showing young people moving away from social conservatism, the polls aren’t all good news for libertarians, either. According to a Pew Poll taken in November of last year, among voters aged 18-29, the term “socialism” is viewed positively by 49 percent of them, while only 43 percent react negatively. “Capitalism,” by contrast, is a slight net negative, with only 46 percent of young people viewing it positively and 47 percent viewing it negatively.
Now, for libertarians, there’s an obvious counter to this – one that I actually made myself at TheBlaze – which is that while “capitalism” gets bad grades among young people, the label “libertarian” gets very good grades, with 50 percent of young people approving of it and only 28 percent disapproving.
However, given that libertarianism is so intimately bound up with capitalism as a concept, and given also that the net positive intrinsic in that number exists only because a large percentage of young people apparently have no idea what libertarianism is, it’s not a stretch to think that if “libertarian” becomes a mainstream political label, those numbers will tighten. Moreover, given that “libertarian” tends to be used as a term of contrast with “social conservative,” if social conservatism ceases to be a bogeyman, and the choice comes down to libertarianism vs progressivism (i.e. between responsibility and endless mediocre free stuff), I believe libertarians could have a very rough time of it indeed, if they fail to make the case for capitalism in a way that resonates and wins back the next generation.
So while Pope Francis’ remarks clearly bear no actual relation to political reality within the United States, nor particularly to economic reality more generally, the fact remains that if the pope, one of capitalism’s great beneficiaries, can be turned against the system, it is not a stretch to imagine a generation that has only ever experienced capitalism as the iron hand of student debt, and the terminal stagnation of a hostile workplace, turning against it with equal or even greater force. If libertarians want to keep the pope’s beliefs confined to the pope, this is the challenge they face, three-legged stool or no.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Office of the Comptroller of the Currency
12 CFR Parts 22, 172
[Docket ID OCC-2013-0015]
And FDIC, NCUA, Farm Credit Administration and Federal Reserve Board
Re: Comments on “Loans in Areas Having Special Flood Hazards.”
December 2, 2013
To Whom It May Concern:
We are individual groups within the smartersafer.org coalition, a diverse chorus of environmental, free-market, taxpayer, housing and insurance groups committed to risk-based insurance rates, property mitigation and environmental protection. As coalition members, we played a significant role in shaping the 2012 Biggert-Waters Flood Insurance Modernization Act and are eager to see that it is implemented in a fashion consistent with legislative intent and good public policy.
As individual members of the coalition—speaking for ourselves and not the coalition as a whole–we support an increased private market role in flood insurance that assures the availability of flood coverage, reduces risks to taxpayers while leveraging as much private capital as possible. We believe that Biggert-Waters is a step in the right direction.
In that context, we are pleased to see that you (OCC, the Fed, FDIC, FCA and NCUA) have proposed issued rules intended to implement sections 100209, 100239, and 100244. Our comments focus on section 100239 relating to the private purchase of flood insurance. With reference to 100239 we believe you should follow the following policies:
- The agencies should permit the proposed streamlined, lender due diligence safe-harbor as outlined in your proposed regulations; its implementation appears practicable as proposed for admitted market insurers insurers. For surplus lines insurers, we suggest that the agencies confer with representatives of the industry to develop an alternative approach.
- The agencies should allow policies that do not meet the statutory definition of “flood insurance” to satisfy the mandatory purchase requirement.
- The agencies should promulgate alternative standards and require privately offered flood insurance that does not meet the statutory definition to meet these standards.
The agencies should permit the proposed streamlined, lender due diligence safe-harbor as outlined in your proposed regulations; its implementation appears practicable as proposed for admitted market insurers. For surplus lines insurers, we suggest that the agencies confer with representatives of the industry to develop an alternative approach.
The idea of a “safe harbor” for private flood insurance makes sense based on our knowledge of insurance markets. While we are not currently aware of any mechanism that allows for the offering of advisory opinions on privately offered flood insurance, the current mechanics of the rate and form filing process would allow state insurance regulators to develop a process to issue such opinions for licensed insurers without significant burdens. The fundamental features of any insurance policy—its deductibles, coverage, costs, and other features—are all part of almost all rate and form filings already. Comparing these policy features to the statutory definition of flood insurance should not be a difficult task for state insurance regulators. In most cases, in most states, we feel that creating the safe harbor would present few if any insurance related difficulties.
In a handful of states, it appears possible that certain information necessary to determine equivalence might not be part of the rate and form filings and the process of issuing written opinion could impose some additional staff time burden on insurance regulators. Any additional costs incurred in this process could and should easily be mitigated through filing fees assessed on regulated insurers. The agencies should work with the National Association of Insurance Commissioners (NAIC) to develop a streamlined process.
In the surplus lines segment of the property and casualty insurance industry, where insurers typically do not file forms with state insurance regulators, however, another approach may be necessary. We suggest that the agencies confer with representatives of surplus lines insurers to develop an alternative approach for flood policy forms utilized by such insurers. A self-certification approach or certification through a private party may be a workable solution.
In the medium term, we feel the existence of a safe harbor is vital to the development of a vibrant private flood insurance market. Without it, many lenders will likely be reluctant to allow borrowers to procure private flood insurance policies. As such, we strongly support the existence of a “safe harbor” provision and believe that it is necessary to encourage a vibrant new flood insurance sector.
The agencies should allow policies that do not meet the statutory definition of “flood insurance” to satisfy the mandatory purchase requirement.
The current NFIP is a something close to a one-size fits all program: it offers only a handful of types of coverage and gives consumers few ways to customize their coverage. It gives individuals a more limited choice of deductibles than a purely private market might. It does not write certain types of coverage—such as community-wide policies—that might have certain advantages for in particular areas. In some cases, the use of one-size-fits-all policies produces results that appear absurd. In some areas, for example, the fact that even a small portion of an elevated structure sits at grade-level results in premiums charged as if the entire structure sat at grade level. These decisions do not appear to make sense and exacerbate the problem of offering coverage that meets the statutory definition of flood insurance. Granting greater flexibility to offer alternative policy types, including some that do not meet the statutory definition of flood insurance, should be considered very much in the public interest.
The agencies should promulgate alternative standards for privately offered flood insurance that does not meet the statutory definition.
Any law related to insurance has to define what is and is not insurance. Some products that might be marketed as flood insurance—say a policy with a $1,000 limit—provide effectively no flood protection whatsoever. Given longstanding policies that provide some limited relief to people who lose their homes to flooding (even when they are uninsured), encouraging the development of policies that provide effectively no coverage would be unwise. For policies that do not meet the statutory definition of flood insurance, such as some offered by less-regulated excess and surplus lines carriers, it’s important to require some level of assurance that carriers offering flood cover are, indeed, solvent. To that end, we have three suggestions:
- Require that all privately written flood coverage not meeting the statutory definition of flood insurance have policy limits at least equal to the lesser of the full value of the insured property or the maximum insured value allowed under NFIP: While they may have some use in some cases, “mini-policies” that provide little or no coverage do not adequately protect taxpayers or communities. Policy limits should be equal to NFIP’s or the structure value of the insured premise. Carriers, of course, should be free to offer more coverage than NFIP as well.
- Allow deductible structures equivalent to any deductible structure allowed in the admitted homeowners insurance market in the state where a flood policy is written: Through form regulation, many states limit the maximum allowable size of a homeowners’ insurance deductible. Deductibles in excess of 10 percent of property value are rare. These same standards should apply, differently in each state, to flood insurance policies as well. Lenders, of course, could require lower deductibles, but the agencies should defer to state legislators, insurance regulators and state-by-state standards in deciding what these regulations should be. We suggest these same standards be applied to policies written by E&S carriers that are used to meet mandatory purchase requirements but that do not meet the statutory definition of flood insurance. In cases where no state standard exists, we suggest as a default national standard that the total of deductibles, co-insurance and other payments that are the responsibility of the policyholder not exceed 15 percent of the home’s value.
- Require that companies offering flood coverage that does not meet statutory definition of flood insurance be either (a) admitted market carriers (b) excess and surplus lines carriers that have a rating from an NRSRO that indicates financial security: As the United States’ system of financial solvency regulation for insurers is mostly state-based, it is sensible to defer to existing state regulation. If a carrier writes property insurance in any state’s admitted insurance market, it should also be allowed to write flood insurance. However, we suspect that, initially, many carriers that offer flood coverage not meeting the statutory definition of flood insurance will be excess and surplus lines carriers. These companies do not participate in guaranty funds and face less intensive solvency regulation. To provide for a level of protection to consumers and lenders alike, we suggest that E&S carriers who want to offer coverage that meets the mandatory purchase requirement be required to carry a rating from at least one Nationally Recognized Statistical Rating Organization that indicates financial security. In the case of A.M. Best Co., for example, this would mean a rating of B+ or better. This would provide a reasonable assurance that such carriers will not simply collapse.
To protect taxpayers, homeowners, and communities, the United States must make greater use of private capital in flood insurance markets. The regulations you have suggested would, with appropriate modifications, represent a major step in that right direction for the nation’s flood safety. We thank you for the opportunity to submit these comments.
The R Street Institute
The American Consumer Institute
National Taxpayers Union
WASHINGTON (Dec. 2, 2013) – Federal rules requiring flood insurance coverage to secure certain mortgaged loans should include a safe harbor for equivalent coverage offered by private excess and surplus lines insurers, the R Street Institute, National Taxpayers Union and American Consumer Institute said today in a letter to federal banking regulators.
Offered in response to a joint request for comments on loans in special flood hazard areas from the Office of the Comptroller of the Currency, FDIC, NCUA, Farm Credit Administration and Federal Reserve board, the letter asks that the regulators proceed with implementing as proposed the regulators’ planned streamlined, lender due diligence safe harbor for admitted market insurers.
However, because insurers in the non-admitted market typically do not file forms with state insurance regulators, the banking regulators’ proposed process could be interpreted to exclude surplus lines insurers, particularly for products that may not meet the statutory definition of “flood insurance.”
“In the medium term, we feel the existence of a safe harbor is vital to the development of a vibrant private flood insurance market,” the groups wrote. “Without it, many lenders will likely be reluctant to allow borrowers to procure private flood insurance policies.”
While encouraging the regulators to confer with E&S market participants to develop a certification process to establish equivalence for products that do not meet the statutory definition of flood insurance, in the meantime, they proposed three basic standards for flood insurance from E&S insurers:
- Policy limits should at least equal either the full value of the insured property or the maximum insured valued allowed by the National Flood Insurance Program.
- Deductibles should be equivalent to those permitted in a given state’s admitted homeowners insurance market.
- E&S carriers should have a rating from a Nationally Recognized Statistical Rating Organization that indicates financial security.
“To protect taxpayers, homeowners and communities, the United States must make greater use of private capital in flood insurance markets,” the groups wrote. “The regulations you have suggested would, with appropriate modifications, represent a major step in that right direction for the nation’s flood safety.”
The full letter can be found here:
From the Sun-Sentinel:
They are backed by some insurance and environmental interests that want to press ahead with the new law to gradually phase out subsidized premiums and set rates based on actual risk.
“From the perspective of people on the right, the big concern would be the debt,” said Ray Lehmann, a Washington consultant who helped lawmakers draft the law, known as the Biggert-Waters Flood Insurance Reform Act. “And from the left, it may be the environmental impact and the fact that we have sort of encouraged risky building.
“There is concern [about the law] from Florida, from Louisiana and from the New York/New Jersey area, where you’ve had rebuilding from [Superstorm] Sandy. But in most of the country, I think there is still support for what Biggert-Waters did and what the intent was.”
R Street Senior Fellow Reihan Salam joined CNN’s Erin Burnett and Democratic Strategist Chris Kofinis to discuss the latest announced Obamacare delay, as the portion of the federal health care website that would’ve allowed small businesses to enroll online will not be rolled out on time. Video is below:This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
A Nov. 12 e-cigarette summit at the Royal Society in London featured a range of views on European prospects for these new products.
Tobacco harm reduction proponents included Clive Bates, Robert West, Jacques Le Houezec, Konstantinos Farsalinos, Jean Francois Etter and Antoine Flahault. One presenter summarized the Swedish experience with snus as population-level proof that safer smoke-free products save lives. He used my published study showing that there were 172,000 deaths from lung cancer – the sentinel disease of smoking – in the European Union in 2002. If all men in the EU had smoked like Swedes, there would have been only 80,000 lung cancer deaths.
A summit attendee asked if I could update that analysis with more recent data. In fact, the World Health Organization and the International Agency for Research on Cancer now have 2009 lung cancer mortality information for 27 of the 28 EU countries (Cyprus is the only exception). I have calculated the number of lung cancer deaths among men that would have occurred at Swedish smoking rates for all of these countries.
Sweden’s lung cancer rate is still the lowest in the EU by a long shot, at 68 deaths per 100,000 men age 45+ years. Finland’s is the next lowest at 102, which is interesting because snus is still used in some parts of that country, despite its prohibition. In contrast, Hungary and Poland have the highest rates, at 278 and 222 respectively.
For perspective, two non-EU countries are worth mentioning. The lung cancer mortality rate in Norway, where snus has contributed to reduced smoking (discussed here and here) was 121, which would have been fourth in the EU. The rate in the United States, where tobacco harm reduction has been trashed by prohibitionists, was 138, which would have placed it tenth, behind Sweden.
In the EU, the 2009 Swedish lung cancer rate was 12 percent lower than in 2002. This is consistent with declines in most countries’ rates, ranging from -3 percent in Hungary (from 287 in 2002 to 278 in 2009) to -20 percent in Estonia (from 227 to 181) and Malta (from 158 to 126).
While the declines may appear modest or even impressive, the lung cancer death toll among European men of 183,423 is intolerable. The EU continues to ban snus everywhere except Sweden. The price for this appalling policy: 99,086 avoidable lung cancer deaths per year, plus more from other smoking-related diseases.
Considering that 91 percent of lung cancer deaths are attributed to smoking, and lung cancer accounts for only 31 percent of all smoking-attributable deaths among men in the EU, the toll from smoking among men in these EU countries is 538,435.
At the Swedish rate, the toll would be 247,570. That makes the net cost of the EU snus ban 290,865 deaths (assuming that all EU male smokers would adopt snus as successfully as Swedish males).
Recently the European Parliament voted on a new tobacco directive; the results make smokers both losers and winners. Parliament continued the snus ban but struck down a provision that would have suppressed e-cigarette access. As Clive Bates noted, “the snus ban tells us that evidence, analysis and even concern for human life are not always that influential in way the EU makes policy.”
The EU snus ban is indefensible and immoral.
Lung Cancer Mortality Rates*, Numbers of Deaths, and Numbers Expected at Swedish Rates Among Men 45+ Years in 27 European Countries, 2009 Country Rate* Deaths Deaths at Swedish Rate Austria 120.3 2,360 1,334 Belgium 176.8 4,851 1,866 Bulgaria 157.8 2,633 1,135 Croatia 213 2,153 687 Czech Republic 176.7 3,950 1,520 Denmark 129.8 1,859 974 Estonia 180.6 475 179 Finland 102 1,426 951 France 152.9 21,983 9,777 Germany 126.8 28,839 15,466 Greece 176.6 5,280 2,033 Hungary 277.8 5,605 1372 Ireland 124.4 1,055 577 Italy 139.8 25,146 12,231 Latvia 192.5 833 294 Lithuania 188.6 1,139 411 Luxembourg 145.7 154 72 Malta 126 124 67 Poland 221.8 16,250 4,982 Portugal 105.3 2,646 1,709 Romania 182.7 7,528 2,802 Slovakia 167.6 1,567 636 Slovenia 157.5 723 312 Spain 157.9 17,061 7,347 Sweden 68 1,820 1,820 The Netherlands 156.8 6,368 2,762 United Kingdom 120.9 19,595 11,021 All 183,423 84,337
*Deaths per 100,000 men per year, age-adjusted to the World Standard Population. Note: Croatia was not an EU member in 2009.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
A federal court in Louisiana will decide in the next few months how much oil company BP must pay in Clean Water Act penalties as a result of the 2010 Deepwater Horizon oil spill. The fine could total as much as $18 billion and, whatever the court determines, will rank among the largest in American history. How it gets spent will serve as a key test of the ability of conservative governors and legislatures to manage wisely the unfettered resources for which they so frequently pine.
Under the terms of the RESTORE Act, which Congress passed in 2012 with strong bipartisan support, 80 percent of civil and administrative fines from the Deepwater Horizon spill go to a trust fund for environmental and economic restoration in the states of Louisiana, Mississippi, Alabama, Florida and Texas. Of this, 65 percent goes directly to state and local governments for use in resource restoration, economic development, infrastructure building and increased resiliency against future disasters. All five states, of course, have GOP governors and Republican majorities in their legislatures.
Depending on how state officials spend this money, the RESTORE Act could go down as a paradigm of effective oversight or as the conservative analog of the stimulus. Either way, conservatives will be in the driver’s seat. The only way to ensure that states allocate the funds properly is to make the spending process radically transparent and targeted towards genuine public goods.
Because the money comes from a civil judgment, not taxpayers’ pockets, conservatives and taxpayer watchdogs may think that the RESTORE funds aren’t worthy of oversight. This would be a mistake with far-reaching consequences.
The RESTORE Act provides an opportunity to implement good policy with benefits for both the environment and the economy in the Gulf Coast states. Across the coast, environmental stewardship and economic growth go hand-in-hand. In Louisiana alone, commercial saltwater fishing is worth $3.1 billion and supports 34,000 jobs. Tourism in Alabama, Mississippi and Louisiana brings in $23 billion a year, predominantly along the coast. Coastal wetlands and barrier islands furnish a number of benefits for people living inland, among them cleaner drinking water and attenuated storm surges.
Spent properly, RESTORE Act funds will go to legitimate functions of government: developing public goods, creating infrastructure and undoing decades of failed federal resource management policies. The RESTORE Act offers a onetime chance for governments to address lingering and economically significant environmental issues.
Without oversight, however, it could turn into just another slush fund. And the ramifications for conservatives, both politically and policy-wise, could be disastrous. Besides the potential for waste, fraud and abuse, there’s the possibility funds could go toward less-than-worthy ends. Small amounts of money from earlier settlements have already started to flow, and the results aren’t entirely encouraging. Mississippi, for example, has earmarked $15 million for a new minor league baseball stadium in Biloxi. The city has, as of yet, no minor league team.
Two major threats to conservative governance come to mind when considering how the money might be spent. First, there’s the risk lawmakers will steer funds to various initiatives with few or no environmental benefits and negative economic benefits—dubious “green jobs” projects and the like.
Worse, and less obvious, while the RESTORE Act offers a onetime windfall, it’s possible that funded projects could create ongoing liabilities for taxpayers. In other words, conservatives could inadvertently use this windfall to grow the governments of the Gulf Coast states permanently. One of the great conservative selling points of the RESTORE Act was that it created no new bureaucracies or perpetual claims on the public fisc. It would be a shame to undermine this principle in execution.
To guard against these dangers, the states receiving money under the RESTORE Act should spend it in a completely transparent fashion, not only because it’s the right thing to do, but because it’s a crucial test of conservatives’ ability to govern. What does that mean in practice?
At a minimum, transparent implementation means that all potential projects, along with their accompanying cost-benefit analyses, should be posted online long before funding decisions are made. This is essential to discovering if proponents of a project are cooking the books on its benefits, as has sometimes been the case with environmental enterprises. Contractor and subcontractor names and key information should likewise be disclosed, in as close to real time as possible.
Every authority that touches RESTORE Act funds should conduct all of its meetings and deliberations in public and publish all requests for proposals and other funding documents. This means 100 percent transparency—no executive sessions or no-bid contracts.
Fortunately, we’re seeing some good news on this front. Mississippi has established a website for citizens to suggest projects and see what is being proposed. As of today, it’s short of what a fully functional transparency website would be, but it’s a step in the right direction.
In 2007, Louisiana developed a long-term coastal master plan to guide protection and rebuilding of the state’s coastal lands. The most recent iteration, written in 2012, helps prioritize potential spending. This isn’t a transparency effort per se, but it does provide a benchmark against which RESTORE Act spending can be judged: If it’s not going to high-value master plan projects, why not?
With transparency in place, journalists, government watchdogs and activists need to keep an eye on how projects are awarded and where the money goes—and keep the pressure on legislators, executive officials and local governments to neither squander funds on goofy ideas nor create long-term obligations for taxpayers.
It’s clear that when President Obama promised to run the “most transparent administration in history,” he, to employ the New York Times editorial board’s phraseology on such matters, “misspoke.” The conservative governors and legislatures along the Gulf Coast have a chance to demonstrate true transparency and well-implemented conservative policy. They shouldn’t squander the opportunity.
Every Thanksgiving, the pre-dinner routine is the same. We trek out, mile-long list in-hand, to our local grocery store, prepared to fill our buggies with every food known to man so we can assemble the perfect Thanksgiving feast. We pick up cranberries for sauce, macaroni and cheese, all the fixings for stuffing, and of course, a turkey. As our cart begins to pile high, the inevitable thought comes into our heads: “This is going to cost a ton.”
From Miami Herald:
The James Madison Institute and the R Street Institute, members of the Stronger Safer Florida coalition, to which the Florida Consumer Action Network (FCAN) belongs, recently released a report on this subject entitled, “Ten Reforms to Fix Florida’s Property Insurance Marketplace — Without Raising Rates.”
The report suggests, “In its current form, the Cat Fund poses the greatest danger to Florida’s insurance system, as well as the state’s ability to recover quickly after a major hurricane.” One of the feasible reform measures the report cites is an incremental reduction plan, proposed by Rep. Bill Hager (R-Boca Raton).
Every Thanksgiving, our pre-dinner routine is the same. We trek out, mile-long list in hand, to our local grocery store, prepared to fill our buggies with every food known to man so we can assemble the perfect Thanksgiving feast. We pick up cranberries for sauce, macaroni and cheese, all the fixings for stuffing, and of course, a turkey. As our cart begins to pile high, the inevitable thought comes into our heads: “This is going to cost a ton.”
This sticker shock is worth taking a moment to focus on, because unfortunately, a hearty chunk of that bill isn’t necessary. Government involvement in food markets, primarily through the farm bill but also through ethanol standards, has Americans paying twice for their food – first through increased prices in stores, and second through the revenue guarantees and other subsidy programs that our tax dollars support.
Let’s start with the centerpiece of the Thanksgiving meal: the turkey. Here the Renewable Fuel Standard (RFS) is mostly to blame. By requiring that a percentage of our fuel come from renewable sources, the government created a corn frenzy, with additional acres being plowed under for corn production and corn costs skyrocketing. Even though corn ethanol turned out to be a bust, the EPA chose last week to merely lower the ethanol target rather than repealing the RFS altogether. While corn prices have dropped, they are still a far cry from pre-RFS levels.
Corn feed for turkeys has risen $1.9 billion since 2005, and, according to the National Turkey Federation, is the primary reason turkey prices have skyrocketed from 79 cents in 2005 to 120 cents today. And even though the RFS was altered, taxpayers will make up a good bit of the difference through the revenue protection policies included in the farm bill, which kick in when prices dip too far below the recent record highs. So while corn itself may become cheaper, we’ll be making up the farmers’ losses through their subsidized insurance policies.
Beyond the turkey, your mac and cheese takes a bigger bite out of your bank account than necessary through the Dairy Product Price Support Program where the U.S. Department of Agriculture buys excess dairy products to keep prices artificially high. The same goes for any recipe using sugar, from the pies to the sweet potato casserole, as USDA’s sugar program restricts imports and purchases extra sugar for use in ethanol, all in an effort to keep sugar prices on target. And don’t forget, for anything using wheat, corn, rice, or barley, you are probably paying three times (or more!): at the grocery store, through direct payments (which are made to farmers annually by USDA based on historical crop production), and through the federal government’s support of the crop insurance industry (where farmers receive 62 percent on average of their insurance premiums and the industry receives $1.3 billion each year in support for administering policies).
The list could go on – it’s safe to say that most of the food on your Thanksgiving table has been touched by the government at some point. And USDA is always looking for ways to expand the net to support the foods that aren’t. All of this results in an incredibly skewed market and an ever-growing web of subsidies. Americans may have a lot to be thankful for this year in their private lives, but given the state of economy, it’s a safe bet that everyone would be grateful for a government that let them keep more of their own money each holiday season.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
From the Florida Current:
“Now that the Cat Fund is at its healthiest, the time is right to shift some of that risk to the private market, so the Cat Fund is never again in a position where it is selling fake coverage,” Christian Camara, director of R Street Florida, a free market think tank, said last month when the latest Cat Fund estimate was released.
When the cause of flood insurance reform is advanced, one immediate bit of pushback that one tends to hear is that reform is unfair. The reasoning usually goes that, by removing the state from flood insurance reform, consumers get socked with a bigger share of the bill. This is an old chestnut, which conservatives should have little difficulty answering in this specific case, yet it persists all the same.
Fortunately, Bill Newton of the Florida Consumer Action Network has an article out (paywall) exploding this myth in the case of Florida’s Cat Fund. The article itself is behind a paywall, but some highlights can be excerpted. This is the money quote:
Opponents of the legislation contended that shrinking the Cat Fund would force Florida insurers to obtain more expensive coverage in the private market and insurance premiums for consumers. But the opposite is true. The cost of reinsurance is on the decline, and accessing that capital would not increase consumer rates.
In point of fact, Newton argues, leaving insurance as a bill to be paid by taxpayers will ultimately cost Floridians far more than simply pushing flood insurance toward the private market:
Florida has taken on a huge amount of risk. The Cat Fund, originally intended to provide stability for Hurricane Andrew-sized events, is supported by issuing debt that would have to be repaid by Florida homeowners, business owners, renters, churches, charities and automobile policyholders. That means ALL the risk is on us.
While the absence of a land-falling storm over the years has provided the fund with an opportunity to build up a cash reserve, we should not forget that its structure relies on post-event bond debt to pay hurricane claims, rather than traditional reinsurance, which spreads the risk outside the state. Florida can only put a limited amount of our funds at risk, and after that current law leaves us at the mercy of the financial markets.
We may or may not be able to borrow enough money, or we may face the possibility of having to pay sky-high interest. That means we might not be able to pay claims, which would be a second disaster, possibly worse than the storm itself. In today’s markets, estimated bonding capacity is down, not up. Thus, interest rates would be higher.
Both these points are absolutely necessary for conservatives to know, if they plan to win the broader flood insurance fight nationwide. Americans have already witnessed the regressive effects of one attempt to socialize risk and appear to have no stomach for similar schemes. Just like Obamacare’s use of poor young people to subsidize the risks of insuring disproportionately wealthy aging baby boomers, socialized flood insurance disproportionately benefits the well-off (often people with pricey oceanfront property) while stripping money from less well-off taxpayers. Americans should accept neither state of affairs.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
The expansion of government surveillance— or, more precisely, our expanding awareness of government surveillance— has had a chilling effect on writers.
According to a survey conducted by the PEN American Center in October 2013, 28 percent of American writers have limited their comments on social media due to concern about increased surveillance. More seriously, one in four writers have “deliberately avoided certain topics in phone or email conversations” and 16 percent have “avoided writing or speaking about a particular topic.”
Due to increased surveillance, and the government’s grudging reluctance to share information about the scope of snooping or the possible consequences for being a thriller writer caught googling “how to build pipe bomb,” American writers may want to make use of uProxy, a service Google developed to help dissidents in autocratic nations mask their communications.
If writers are feeling the chill, tech businesses can’t be far behind. It is increasingly seen as a liability to keep servers and information on U.S. soil. After all, the National Security Agency placed physical taps on fiber optic cables carrying information in and out of the data centers run by Google, Yahoo and others. Just as writers have started editing or self-censoring, tech companies may start avoiding what would otherwise be best practices in order to maintain their users’ privacy.
Or they may start avoiding the United States all together.
The European Union has stricter laws on privacy than we do stateside, and, just as Google had to pare back its Street View program in Germany to remain in compliance, other tech companies may need to guarantee that the United States won’t have access to their data, perhaps by abandoning the U.S. market.
While the White House emphasizes STEM (science, technology, engineering, and math) education to keep America competitive intellectually and economically, NSA overreach may frighten off potential entrepreneurs or turn them into expatriates.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.