News & Updates


Legislature trying to make Citizens actuarially sound

Soon the legislative session will be over. In addition to the budget and a myriad of other issues, the largest problem to be solved is the looming financial hammer that will fall on all of us if there is one or more significant hurricanes that hit Florida this hurricane season, which begins in June.

The Florida Hurricane Catastrophe Fund is supposed to be $28 billion. There is only approximately $10 billion in the fund ,leaving a shortfall of $18.3 billion. Under normal conditions we could sell bonds to cover this. However, during the past two years the poorly crafted financial laws passed by the Legislature have caused Florida’s bond rating to go from A++ to A-. Very few financial institutions want to buy our bonds with an A- rating.

The Florida Legislature and the governor have used their power to make Citizens Insurance rates out of thin air by freezing rates. This decision was made to gain political points with the voters and the result was insurance rates that were not actuarially sound.

State-sponsored Citizens Insurance Co. has already passed onto you 10 years of assessments from claims occurring during the 2004 – 2005 hurricane seasons. Citizens currently has approximately $430 billion in insured exposure. They have only $3 billion in surplus reserves to pay claims. In February 2009, James Maloney, chairman of Citizens, said “any kind of significant storm event would, or could, wipe that $3 billion) out in a few short hours.”

Florida now charges two surcharges and six assessments affecting many policies such as business, commercial, home, umbrella and auto policies. Some will last through 2017.

I spent several days in Tallahassee during this legislative session. The good news is the current Legislative session is seriously attempting to solve the problems mentioned in this article.

“I think that everyone’s waking up,” said Ron Reagan, the state’s House speaker pro tempore. A bill is moving through the Legislature that provides for a sliding scale of rate increases to arrive at an actuarially sound rate for Citizens during the next five years. The rate increases appear to be approximately 10 percent per year.

The State Board of Administration is made up of Gov. Crist, Chief Financial Officer Alex Sink, and Attorney General Bill McCollum.

This board is seriously working on several methods to reduce the Florida Hurricane Catastrophe Fund $18.3 billion shortfall. They are seeking help from the federal government in the form of a loan guarantee. I personally do not see much hope soliciting the Feds.

Let us hope and pray they get it right this year and that we have no hurricanes hitting Florida this season.

Robert “Bob” Fowinkle, is the president of Moore, Fowinkle, & Schroer Agency in Bradenton. He can be reached at (941) 755-2628 or by e-mail at