Florida Must Cut Hurricane Liability, Sink Tells CEOs
Dec 14, 2007
Tampa Tribune, 12/14/2007
TAMPA – The cost of property insurance for businesses has fallen by 30 percent in some cases, but the state still has much work to do to solve its insurance problems, state Chief Financial Officer Alex Sink said Thursday.
Its goals should include reducing its huge financial exposure to a catastrophic hurricane, she said.
Sink, a Democrat from Tampa, returned to the area Thursday to speak before the CEO Council of Tampa Bay, a local organization of business leaders. Among the topics were Florida’s insurance crisis, the housing slump and the state’s overall economy.
Despite homeowners’ frustration with their insurance bills, Sink said the state is seeing improvement on some fronts. For example, businesses recently have told her that sky-high commercial insurance rates have fallen 30 percent to 50 percent in some cases.
And, in a recent trip to England she met with officials from Lloyd’s of London and found that business insurers sounded receptive about doing business in Florida. ‘They’re not willing to come into Florida whole-hog, but there’s some softening,’ Sink told a reporter after her speech.
Jonathon Kees, a spokesman for the Florida Office of Insurance Regulation, confirmed that some small business insurers have dropped insurance rates significantly. For example, The Hartford and its subsidiaries – one of Florida’s biggest small business insurers – lowered rates by 30.1 percent this year, and Nationwide Mutual Fire Insurance lowered them by 24.7 percent. Some other companies dropped them by only 1 percent or 2 percent, Kees said.
The lack of hurricanes for two years and the state’s Hurricane Catastrophe Fund, which sells backup insurance to insurers, have helped bring down rates, Kees said.
In another good sign, Sink said workers’ compensation rates will drop 18 percent next year, and they are down 50 percent since 2003, when Florida reformed the system.
Still, she said the state needs to reduce some of the risk it faces from a devastating hurricane. As it stands now, private insurers would cover as much as they could afford, and then fall back on either reinsurance from the private market or reinsurance from the Catastrophe Fund.
If a hurricane did $28 billion in damage to Florida, the state might have to issue $20 billion in bonds. That would mean putting a special assessment on homeowners and business to the tune of $1.7 billion a year for 30 years, Sink said.
The state must spread some of that risk to private insurers, she said.
Reporter Michael Sasso can be reached at email@example.com or (813) 259-7865.