Insurance claims continue from 2005 storms
Florida consumers will be hit with a higher surcharge on their insurance policies to cover losses from 2005 storms.
BY BEATRICE E. GARCIA
The fund that backs up private insurers operating in Florida will ask state officials next week to approve an additional .3 percent surcharge on almost every insurance policy in the state.
For Floridians, the change will mean an additional cost of $13 for every $1,000 premium. The additional fee would begin in January 2011.
Jack Nicholson, the Florida Hurricane Catastrophe Fund’s chief operating officer, said he’ll ask the Florida Cabinet next week for permission to raise an additional $710 million to cover losses that continue to mount from 2005, when four hurricanes hit the state.
The surcharge currently tacked on to every insurance policy in the state will increase to 1.3 percent from 1 percent. Consumers will see the higher charge as they renew policies after Jan. 1, 2011. Typically, all such requests are approved.
Initially set to end in 2012, the assessment will be extended through July 2016.
Nearly all individual and business insurance policies — including those on cars, homes, boats and commercial liability — are included in the CAT fund assessments. Only workers compensation and medical malpractice policies are exempt.
Established in 1993, the Florida Hurricane Catastrophe Fund sells lower-cost back-up insurance to companies selling homeowners’ coverage in Florida.
The reinsurance covers a portion of the money insurance companies have to pay in claims after a major catastrophe, allowing the insurer to preserve some of its own capital.
Insurance company executives, insurance regulators and lawmakers say they continue to see a stream of claims from the 2005 storms, mostly from Wilma, which hit South Florida in late October. As private carriers pay these claims, they turn to the CAT fund to recover some of the losses they’ve covered.
This latest surcharge is needed to cover a shortfall between the amount of cash the fund had on hand when the hurricanes hit and the total losses it has been required to cover. So far, the CAT fund has raised $1.9 billion to cover claims from the 2005 storms.
Nicholson believes the 2005 claims continue to dribble in because Hurricane Wilma affected so many homes that some homeowners are discovering additional damage and reopening claims. But insurers contend some of the reopened claims are fraudulent or unnecessary.