Florida debates storm finances
Apr 28, 2012
The following article was published in The Tampa Tribune on April 28, 2012:
State debates storm finances
By Carl Orth
With the 2012 Atlantic hurricane season about a month away, state lawmakers continue to debate if state rainy-day funds have enough money to cover claims in the event of a major crisis.
The top financial guru at the Florida Hurricane Catastrophe Fund, COO Jack Nicholson, says “hurricane tax” surcharges on insurance policies could last for years, if not decades, if there is a shortfall of money to pay damage claims after a major hurricane.
Often called the “Cat Fund,” the system was created in 1993 after Hurricane Andrew swept across South Florida. Another Andrew-sized storm this year would rack up losses in the neighborhood of $30 billion, Nicholson said.
Assessments remain today on some policies to help pay for the series of storms that struck Florida in 2004 and 2005, according to Kyle Ulrich, senior vice president of public affairs for the Florida Association of Insurance Agents.
State Sen. Mike Fasano and state Rep. John Legg say the catastrophe fund has adequate resources for most emergencies.
Fasano, R-New Port Richey, suspects “scare tactics” are being employed to help raise insurance rates. Legg, R-Port Richey, challenges assumptions made from computer models based on projections of 100-year storms.
Fasano and Legg say the want to shield policyholders from huge spikes in premiums since no storms have struck the state for some six years.
“The Cat Fund does have sufficient funds to cover if a storm strikes,” Legg said. “However, to pay in advance for a 1-in-100-year storm is not (fiscally) responsible.
“The cost upfront to the consumers and home owners would be extreme. We must adequately plan, but some of the numbers I think should be re-crunched so our ratepayer does not (get) crunched based on questionable numbers.”
“We continue to hear the scare tactics that we must raise premiums now to prevent a potential shortfall down the road,” Fasano said. “Well, those premiums will be borne by today’s policyholders and, statistically, they will be paying for nothing.
“The chance of a 100-year storm is just that: 1 in 100. Florida has not had a major storm since 2005, so there has been ample time to build up reserves during the past seven years. Have we seen premiums decrease during those seven years? The answer is simple: No.
“If we reduce the Cat Fund and increase premiums as is being advocated, costly reinsurance, most likely from out of state and unregulated companies will follow. What will happen if the feared storm does not occur? Will policyholders be refunded the excessive premiums they will have been forced to pay? I think we all know the answer to that question.”
Find this article here: http://www2.tbo.com/news/pasco/2012/apr/28/panewso1-state-debates-storm-finances-ar-397520/