Officials try to boost hurricane fund
The proposal raises premiums at one firm, gives money to another.
By Brandon Larrabee Story updated at 4:14 AM on Wednesday, Apr. 15, 2009
TALLAHASSEE – The outlook for a state fund intended to shore up the property insurance market after a hurricane improved Tuesday, with credit markets thawing and a House committee approving a measure relieving the fund of some responsibilities.
Officials in charge of the Florida Hurricane Catastrophe Fund, or CAT fund, told Gov. Charlie Crist and the Florida Cabinet they now believe the state could sell up to $8 billion in bonds to cover losses if a catastrophic storm hit, a substantial increase over the $3 billion financial advisers had earlier predicted.
The change makes it more likely that residents whose insurance companies depend on the state fund will see their claims paid if a major storm hits. It also helps as state officials scramble to ensure the fund’s viability and prevent the possibility that insurance companies will be downgraded by ratings agencies, which could make it more difficult to secure a mortgage.
While that does not entirely solve an expected $18.4 billion gap between the fund’s statewide obligations and its ability to pay them in the fiscal year that begins July 1, it could significantly ease the pressure the fund would face in the event of a major storm.
The CAT fund is a reinsurance program, meaning it sells coverage to private insurers who then sell coverage to consumers.
But Chief Financial Officer Alex Sink, speaking after the Cabinet meeting, said even with the higher bonding ability, the state still needed to reduce about $11.1 billion in optional coverage that the fund sells to insurers.
"We need to get about the business of bringing that upper layer down as soon as we can," said Sink, a Democrat.
Hours after she spoke, the House General Government Policy Council approved a measure that would eliminate the optional coverage over six years. The measure has widespread support at the Capitol.
Under the legislation, premiums for state-backed Citizens Property Insurance Corporation would rise until they were in line with what is needed to make the company solvent. The plan would also funnel $26 million of the new premium money to bankroll My Safe Home Florida, a program that assists property owners looking to fortify their homes against storm damage.
The panel also approved a measure that would clip the regulatory wings of the Office of Insurance Regulation. That proposal, by Rep. Bill Proctor, R-St. Augustine, would allow insurers to sell "nonassessable residential property insurance policies," whose prices could not be held down by OIR.
Those policies could not be billed to help pay for losses suffered by Citizens in a storm.
Supporters say that measure would allow Floridians to get more reliable if more expensive coverage that has fled Florida in recent years. Most recently, State Farm of Florida announced it would leave the property insurance market over a two-year period after Insurance Commissioner Kevin McCarty turned down the company’s request for a rate increase that would have averaged 47 percent statewide.
"This legislation provides consumers another choice," said John Hall, state director for small-government group FreedomWorks, "and protects them from a hidden hurricane tax."
brandon.larrabee@jacksonville. com, (678) 977-3709