Nelson, Richter Release Insurance White Paper
Representative Bryan Nelson and Senator Garrett Richter have released a white paper entitled, “How Critical is Property Insurance in Florida?” drawing attention to Florida’s reliance on assessment (taxing) mechanisms to prop up the state’s insurance market. Nelson and Richter point out that Florida is making promises through three government-run entities that the state probably will not be able to keep. The authors point out that Citizens Property Insurance Corporation, the Florida Hurricane Catastrophe Fund, and the Florida Insurance Guaranty Association are state creations and rely on the same funding source– Floridians.
Nelson and Richter lament that only two of the top 20 homeowners insurers in Florida hold A.M. Best ratings, and the largest (by far) is Citizens, a government-run entity. They detail Citizens’ reliance on assessments and lack of reinsurance at levels that compare to the admitted market, arguing that the potential for assessments could be substantial.
Regarding FIGA, Nelson and Richter state that the best way to avoid assessments from the guaranty fund is to have financially strong insurers writing in the state. As for the FHCF, they point out that political “repurposing” caused the FHCF to grow from a modestly-sized reinsurance backstop to an entity that was, and in some instances might continue to be, selling reimbursement promises it will have trouble meeting. The authors attribute the FHCF’s expansion to a political desire to suppress insurance rates.