BARNEY BISHOP: At risk from hidden hurricane tax
May 30, 2008
Orlando Sentinel--May 30, 2008
Sunday marks the first day of hurricane season, and experts at the National Oceanic and Atmospheric Administration predict that this hurricane season will be above normal, with 12 to 16 named storms. Even more alarming is the fact that we could face six to nine hurricanes and two to five major hurricanes.
This dangerous situation will only be compounded by a hidden hurricane tax that can and will be tacked on to every home, business and automobile policy when the next major storm strikes our state.
If one of those major storms makes landfall on our coastline, all Floridians will face an enormous financial risk and the potential bankruptcy of the state. From home and business owners to not-for-profit agencies and car owners, any person or organization with one or more property insurance policies is affected and at great risk.
Unfortunately, Chief Financial Officer Alex Sink’s bipartisan proposal, which aimed to reduce the risk associated with state’s reinsurance fund — known as the Florida Hurricane Catastrophe Fund, or CAT fund — by $3 billion, was not approved by the Florida Legislature during the 2008 session. Despite this fact, Associated Industries of Florida realizes the importance of pursuing solutions to the current situation. Consequently, we have initiated the Hurricane Home Rating Coalition to give consumers incentives to harden their homes in Florida.
For the next several months, Florida will face the agony of watching and waiting to see where the storms of the Atlantic Ocean and Gulf of Mexico will land. Before we endure the tax burden associated with a major storm, the leaders of Associated Industries of Florida continue to urge our elected officials to work toward fostering a more competitive business environment.
Throughout the legislative session, Associated Industries of Florida has been an advocate of the insurance and reinsurance industry. We believe it is imperative that our key leaders take the opportunity to seek broader utilization of reinsurance, as this industry can help individual policyholders by spreading the insurance risk worldwide.
And while there is fear that the CAT fund might be unable to provide sufficient funds to policyholders, insurance companies statewide are working toward solutions for both pre- and post-hurricane funding. In addition, the CAT fund is looking at options to provide additional financing before a hurricane hits and could make a report to the Florida Cabinet in June.
The reality of today’s insurance market has left many Floridians questioning how the CAT fund will fully pay for claims. As a state, we will wait out the next several months, hoping that Mother Nature spares our hurricane-vulnerable coasts. During this wait, we continue to urge our fellow citizens to support our elected officials and pressure them to provide alternative solutions to the current Florida Hurricane Catastrophe Fund in order to alleviate the risk all of us are susceptible to as we enter the 2008 hurricane season.
First and foremost, we need a competitive insurance market in Florida because few companies or consumers can afford to self-insure. Second, we need a regulatory environment that encourages insurance companies to do business here; otherwise we are left with only Citizens Property Insurance — which is a disaster waiting to happen. Third, we must aggressively pursue mitigation of homes to lessen losses, the No. 1 reason for rising insurance premiums. Together we can weather this crisis, but we need to accept reasonable and rational risks, not unnecessary and potentially debilitating risks.