House Measure Would Lessen Storm Insurance Bite
Apr 15, 2008
The Ledger--April 14, 2008
THE ASSOCIATED PRESS
TALLAHASSEE | Home insurers would be able to purchase less state backup insurance under a measure approved by a House panel in hopes it will spare Floridians from big insurance assessments if there is a major hurricane.
Property insurance companies buy backup coverage — reinsurance — to protect them against large payouts.
Last year with property insurance rates increasing, in large part because of increases in the cost of reinsurance, the Legislature made more state-backed reinsurance available.
That reinsurance, from the state’s Hurricane Catastrophe Fund, is much cheaper than private reinsurance. But it has a catch: if the Catastrophe Fund comes up short after a major storm, the shortfall must be paid by Floridians in the form of assessments on their homeowners insurance, car insurance and other policies.
The House Policy and Budget Committee on Monday approved a bill (HB 7021) that would reduce the amount of state backup coverage available from $12 billion to $9 billion. It also would make the Catastrophe Fund responsible for 70 percent of the insurance company’s loss. Right now, most Catastrophe Fund policies cover 90 percent of losses.
Backers acknowledge that there’s a possibility that in reducing the availability of Catastrophe Fund coverage, it could lead to a small increase in homeowners premiums, about 1.5 percent to 2 percent on average.
The unanimous vote to back the state away from some of the risk for a major storm came at the urging Chief Financial Officer Alex Sink, who has been warning of the dangers of a major storm causing economic havoc by requiring massive assessments.
She said private reinsurance companies are more and more willing to provide coverage for insurance companies doing business in Florida.
"We’re bearing a lot of risk," said Sink. "Let’s take it off our backs and put it on the backs of people who live in Europe, and Asia and elsewhere around the world."
The measure now goes to the House floor.