A View From The Press Box

I can't get past the fact that, once the water gets inside the levee, it remains there until somebody pumps it out. Seems to me that makes New Orleans different from the rest of the cities on Mr. Pitt's list.

But he and any like-minded folks can invest in re-development down there if they like--it's their money.

Similarly, insurance companies should be free to avoid the place. Why would any insurance underwriter even consider exposing his shareholders to another Katrina-like event--or its aftermath?

Those who choose to live where natural disasters may occur, must expect to pay through the nose for insurance coverage.

The insurance industry has a right to set the premiums at a level to pay damage claims and make a profit. And yes, that is anywhere in the United States.

When people make choices with blindfolds on, they deserve whatever comes their way.

Eventually the whole of Planet Earth will be a disater area, when in a couple billion years, the sun explodes.

But in the meantime, you gotta live someplace. And in the meantime, insurance companies can make money for their owners if they can estimate future loss frequency and severity well enough for the coverage and the location, and charge premiums accordingly.

Don't concentrate too much of your capital in places that are prone to disasters, and spread the risk, if you did concentrate too much, through reinsurance (if available).

Governments ought not interfere in the process of determining contract terms and conditions and depressing prices. That just causes shortages of the product and encourages unwise risk-taking risk.

The proper role of government is to prevent and prosecute coercion or fraud by either side, and then enforce contracts voluntarily entered into. That includes regulation of the solvency of carriers.

And it's not the proper role of government to bail anyone out of the consequences of their risk taking, if the risk was voluntarily taken.

Anyone voluntarily investing money in the 9th Ward is taking a particular risk (and investing anywhere else also has risks, though of different kinds and magnitudes) and should be entitled to mitigate and transfer that risk to anyone willing to take it, at a price they both agree on, without corecion of either side by government.

Your question, Sam, is ultimately what makes our free market economy so great.

Any company can choose to cover any of these areas--New Orleans, Miami, San Fran or what have you--if they choose.

What I don't want to see from past experience is use of premium and surplus from non-high risk areas to subsidize the poor people in their million-dollar hillside mansions and beachfront homes who have to pay extraordinary premiums for insurance coverage.

Normally I would play the safe card and say this was a "sucker's bet"--to quote you, Sam--but items more odd than this one have surprised us in the past, such as investing in IT technology in 1975.

Many a broker in the 70s considered that a sucker's bet, but I would lay odds a few of them would like to go back in time and fix that mistake.

Katrina devastated most of the coastal south. Everyone is all for rebuilding everywhere except the 9th Ward of New Orleans. Is it because it is a poor district, a "soup bowl" or New Orleans?

How many times in the past has the 9th Ward been under water compared to Miami and Mississippi Gulf Coast damage, San Fran mudslides and California fires? That is what needs to be considered--the historical risk compared to the future risk.

With that said, I still beleive insurance companies need to set premiums based on the risks, but I applaud Brad Pitt for his envolvement in New Orleans because it really is a great city with such rich American history.

I think the point Mr. Pitt misses is perhaps that it is possible to mitigate against some damage due to storms such as hurricanes and earthquakes with building codes.

EQ-resistant construction has helped reduce damage in many of California's earthquakes, and the newer buildings in Florida that follow the latest building codes survive most hurricanes much better than the older buildings.

But in the New Orleans "soup bowl," how will you build to mitigate against flood waters that tear everything apart?

Build everything on concrete piers and pilings 25 feet high that are sunk 50 feet into the ground and hope that the soil won't settle and destroy the buildings anyway?

And have a stilt city that the poorer elderly and infirm, many of whom lived in the Ninth Ward, couldn't reach their home due to the new heights?

Then what? Put in elevators that wouldn't work when the electric goes out, trapping everyone either up in or out of their homes?

If a private developer wants to rebuild the complete Ninth Ward, privately insure it at their expense, and stand the loss potential of the next flood, I think it would be a wonderful, charitable, although losing venture.

But to think insurers should be coerced or forced to write coverage for an assured disaster is putting pen to paper in the face of an oncoming train wreck.