CSG was invited to speak at a roundtable recently and took the opportunity to put the focus on state and local governments when it comes to resilience finance. While the quote below highlights one of red flags discussed, we offered our view point on where the state of play will be a year from now if we approach resilience with a public finance focus.
“Let’s address one of the current darlings of the resilience finance space or at least where I see public finance and resilience overlapping: CAT bonds have come up as a cure-all for the insurance issue. While they offer improvement over other federal programs like the National flood program or FAIR Act related programs, they are not the solution. CAT bonds represent an extension of the public balance sheet at taxpayers' expense. This is not sustainable. What we’re really seeing is a fluffing of the capital stack without addressing the core financial and structural issues at hand. I say this well knowing many in this room disagree - and I want to be clear - they represent an incremental step of what should be a bigger solution - but it seems the markets, policy advisors and lawmakers can only agree on that small step - and after taking 5 or 6 small steps with no comprehensive plan, a state finds itself billions in debt through the CAT mechanism. This is not fiscally sound or sustainable.” - Matt Posner