Editorial: Getting soaked
May 13, 2012
The following article was published in The Gainesville Sun on May 13, 2012:
Editorial: Getting Soaked
Here’s a good news/bad news scenario for the upcoming hurricane season:
Good news: An especially active season could end Florida’s historic drought.
Bad news: It could also wipe out the state financially.
The state-owned Florida Hurricane Catastrophe Fund expects to have about $8.5 billion in cash reserves to help cover the cost of storm damage. Just one hurricane, Wilma, in 2005, cost $9.4 billion.
CAT Fund operators say they are prepared to borrow up to $7 billion more if necessary, to be paid back by a surcharge on every Floridian’s property and auto insurance policies.
Assuming that CAT is able to borrow that much.
Reports the Florida Times-Union, “one firm — Goldman Sachs — said Florida likely could borrow no more than $4 billion … A Goldman Sachs employee told the (CAT) advisory council that the financial meltdown had eliminated a ‘whole class of investors.’?”
We have known for years about the state’s extreme financial vulnerability should a “big one” hit. But lawmakers have been reluctant to tackle the insurance reforms necessary to spread the risk beyond state government. Luckily, the last several hurricane seasons have been relatively benign.
So here’s hoping for yet another quiet season. Otherwise both Florida and its taxpayers/ratepayers stand to get soaked.