Hurricane fund possible shortfall spurs calls for changes
May 11, 2012
The following article was published in The Florida Current on May 11, 2012:
Hurricane Fund Possible Shortfall Spurs Calls for Changes
By Travis Pillow
Groups calling for changes to the fund that backstops the state’s property insurance market have seized on the latest estimates released this week, which show the state may not be able to borrow enough money to meet its obligations if a big storm hits.
On Thursday, the Florida Hurricane Catastrophe Fund Advisory Council estimated the fund could fall nearly $1.8 billion short of its expected obligations, and suggested the state should consider borrowing money before the start of hurricane season to fill the gap.
The May estimates come as insurers prepare their financing programs to prepare for the June 1 start of hurricane season. Estimates of what the state can borrow if that happens were developed in concert with Wall Street investment banks and vary widely depending on their assumptions about the fluctuating bond market.
The fund is intended to hold down insurance rates by providing a subsidized backstop to insurers in the event of a major storm.
Christian Camara of the Heartland Institute, a “free-market” group, said the estimates bolster the argument for measures such as HB 833, a bill aimed at shrinking the fund that died during this year’s legislative session.
While the proposal was repeatedly discussed in committee, it died without being brought up for a vote in the House. Rep. Bill Hager, R-Boca Raton and bill sponsor, has already pledged to support such efforts next year.
Reducing the obligations of the fund would likely require insurance companies to buy more reinsurance on the private market, which would in turn be passed on to their customers. Sen. Mike Fasano, R-New Port Richey, said during the session that the measure would “raise rates on the backs of the policyholders of the state of Florida, no ifs, ands or buts.”
Camara said that while the fund is designed to keep costs low, it should be reduced to a size that will allow it to support the private market without requiring the state to borrow extra money in advance.
“The Cat Fund is just entirely too large, and it needs to be scaled back,” he said. “If you don’t have the ability to raise the funds to settle your claims, essentially what you have is false coverage.”
Other groups calling for changes were Associated Industries of Florida, the Florida Wildlife Federation and the Florida Consumer Acition Network.
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