State has case of hurricane nerves
By WILLIAM MARCH
Published: April 15, 2009
TALLAHASSEE – As the clock ticks toward June 1, state officials increasingly are concerned about whether Florida is financially ready for the coming hurricane season and the next bad storm.
If the state isn’t prepared, they fear, it might not even take an actual hurricane to cause problems for Florida homeowners. They could feel the effects in their mortgages even if there’s no wind blowing.
"It’s a very fluid situation, and yet it’s very concerning," state Chief Financial Officer Alex Sink of Tampa said today after discussion of the issue by the Florida Cabinet.
Sink made her comments after a state Cabinet meeting Tuesday in which Florida financial officials heard an optimistic report about the Florida Hurricane Catastrophe Fund, which backs up property insurance companies.
Easier credit markets have increased the Cat Fund’s ability to borrow money if needed to help pay claims that insurance companies can’t handle, said Ash Williams, executive director of the State Board of Administration.
That means, Williams said, that the Cat Fund could handle a storm equivalent to 1992’s Hurricane Andrew, which caused damage of $22 billion in today’s dollars.
Williams said that even with its increased borrowing capacity, the Cat Fund is about $13 billion short of the $29 billion the Legislature has said it must be ready to handle.
The U.S. Treasury has turned down the state’s request for a line of credit for the Cat Fund, Williams said. The state is hoping for federal help – credit from the Federal Reserve or legislation sponsored by Florida congressional members authorizing the Treasury to issue a line of credit, Williams said.
Some state insurance companies, state officials acknowledged, may be depending on the Cat Fund to shore up their ability to pay claims.
"There are companies … that are going to have grave difficulties" getting the necessary financial backup, Insurance Commissioner Kevin McCarty told the Cabinet.
If the Cat Fund isn’t stable, insurers depending on it might be considered unstable and their policies inadequate to back mortgages.
The problem, Sink said, could come among some 60 small Florida-based companies, many of them new, that are taking over policies abandoned by big national insurers including State Farm.
If ratings agencies believe the companies can’t pay claims, they might downgrade the companies’ ratings, causing mortgage companies and banks to reject the policies.
Reporter William March can be reached at (813) 259-7761.