The government has tried that: http://en.wikipedia.org/wiki/National_Flood_Insurance_Program http://en.wikipedia.org/wiki/National_Flood_Insurance_Progra... By

The government has tried that: http://en.wikipedia.org/wiki/National_Flood_Insurance_Program http://en.wikipedia.org/wiki/National_Flood_Insurance_Progra... By charging premiums below market risk valuation, the program has encouraged building in vulnerable areas. This has led to destruction of resources and government transfers to the rich people in a position to own coastal property.