It wasn't a market failure

Ronald Bailey looks at the potential devastation of the insurance industry as the claims pour in from the Texas coast:

The fact that insurance companies refused to insure property located on storm-wracked coasts is not an instance of market failure. A market failure supposedly occurs when the price of goods and services do not reflect the true costs of producing and consuming those goods and services. That's clearly not what happened here. The market is practially shouting at people, "Don't build something you can't afford to lose where hurricanes periodically crash ashore."

Instead the state "insurance" scheme is an example of government failure which occurs when a government intervention causes a more inefficient allocation of goods and resources than would occur without that intervention. In this case, it's the government that's telling people that it's OK to build in dangerous areas and then not charging them enough for the "insurance."

It's one of the biggest omissions from media coverage of hurricanes . . . the largest reason for the increasing damage toll isn't that the storms are necessarily more powerful or more frequent, but that many more people have been moving into areas that are subject to greater risk from those storms. Government meddling in the insurance market distorts the necessary pricing signals to property owners . . . usually forcing insurance companies to provide below-cost policies in high-risk areas or requiring private insurers to underwrite the losses of quasi-public or public insurers.