Opinions on hurricane fund differ
Apr 29, 2012
The following article was published in Hernando Today on April 29, 2012:
Opinions on Hurricane Fund Differ
By Carl Orth
With the 2012 Atlantic hurricane season little more than a month away, area state lawmakers and other officials 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 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.
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.
On the other hand, state Sen. Mike Fasano and state Rep. John Legg believe 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 now.
Legg, R-Port Richey, challenges assumptions made from computer models based on projections of 100-year storms.
Both 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. They had opposed legislation this spring introduced by state Rep. Bill Hager, R-Boca Raton, and state Sen. J.D. Alexander, R-Lake Wales.
The legislation would have begun the “process of right-sizing the Cat Fund to ensure the fund can fully pay its obligations in the future,” Hager wrote.
“While we have been storm-free for the past six years, should a storm hit Florida this season, the fund’s current structure, as well as the structure of the overextended Citizens Property Insurance Corp., could well be collectively responsible for the largest tax increase in Florida’s history,” Hager argued.
“The Cat Fund does have sufficient funds to cover if a storm strikes,” Legg countered Wednesday. “However, to pay in advance for a 1 in 100 year storm is not (fiscally) responsible.
“We continue to hear the scare tactics that we must raise premiums now to prevent a potential shortfall down the road,” Fasano said Friday.
“Well, those premiums will be borne by today’s policyholders and, statistically, they will be paying for nothing,” Fasano argues.
“If policyholders are forced to pay now the insurance industry makes out like bandits; the consumer doesn’t, and never will,” Fasano concluded.
Ulrich, at the insurance agent association, took a middle-of-the-road perspective on the issue.
“Most everybody agrees” on the need to reduce exposure of the Cat Fund, Ulrich said Friday. “We need to be aware of unintended consequences” from reducing the fund too quickly, he cautioned.
“It poses a rather large liability to the taxpayers of Florida,” Ulrich said. If the fund comes up short by $8 billion to $10 billion, the state would have to try to make up the difference through bonds.
Availability of the state to issue bonds is by no means certain, Nicholson said.
The flip side of the coin concerns Citizens Property Insurance, Ulrich said.
The state-backed insurer of last resort remains competitive on rates or much lower than private insurance companies in many areas.
Two weeks ago, Gov. Rick Scott signed legislation intended to give Floridians an incentive to buy property coverage from private insurers rather than Citizens Property.
The legislation limits the size of the surcharge customers of private insurers would face if Citizens has trouble paying claims after a major storm hits the area.
Find this article here: http://www2.hernandotoday.com/news/hernando-news/2012/apr/29/haobito1-opinions-on-hurricane-fund-differ-ar-397779/