Is the problem over insurance or hurricanes?
The state would take on storm risks under a new plan.
By Brandon Larrabee
Story updated at 6:59 AM on Wednesday, Mar. 25, 2009
TALLAHASSEE – The state would take over all hurricane insurance in Florida while at the same time dismantling its property insurance and reinsurance funds under a sweeping plan that received a lukewarm reception Tuesday.
Rep. Ellyn Bogdanoff, R-Fort Lauderdale, says her bill would calm the roiled property insurance market in Florida and actually allow taxpayers to save money while boosting the private sector.
Under Bogdanoff’s plan, the state would do away with Citizens Property Insurance Corp., a taxpayer-backed insurance company, and the Florida Hurricane Catastrophe Fund, which provides reinsurance to companies who sell property policies.
The state would then assume all hurricane risk and allow private insurers to sell policies for other property risks, like fire and vandalism. The private companies would administer the hurricane insurance, but the state would receive the premiums and be responsible for paying claims if a major hurricane struck.
State officials would then purchase reinsurance coverage to ensure it could cover the damage in the event of a hurricane more powerful than a 50-year storm.
Bogdanoff said her plan represented the best way for the state to extract itself from the insurance market, a goal that has eluded lawmakers in recent years, while also calming the markets.
"We don’t have an insurance problem, we have a hurricane problem," she said. "And that’s probably not going to go away."
Lawmakers have devoted new attention to property insurance in recent weeks after State Farm Florida announced it would pull out of the state and as state officials lobby the federal government for a letter of credit for the Hurricane Catastrophe Fund. That program could come up billions of dollars short if a major hurricane hits.
With the current system, the state would have to raise about $35 billion under a worst-case scenario, Bogdanoff said. Her plan would require the state to raise just $22 billion, and less in future years if the state continues to collect premiums without facing a major storm.
But members of the House Insurance, Business and Financial Affairs Committee, which heard the proposal Tuesday, were skeptical about the proposal.
"If the problem we have is a hurricane problem, then why are we putting all of that problem onto the state?" said Rep. Jim Waldman, D-Coconut Creek.
Rep. Alan Hays, R-Umatilla, also saw the proposal as merely compounding the issues the state already faces.
"If Citizens and the CAT fund are a problem," Hays said, "then this program here is a problem on steroids."