Sink, Rubio forge insurance alliance

Feb 11, 2008–Feb 11, 2008

When Republicans and Democrats approved a plan last year to dramatically expand Florida’s hurricane catastrophe fund, increasing taxpayers’ exposure to risk in the process, the idea was that the compromise was worth it.

The trade-off, the thinking went, would be a meaningful reduction in homeowners’ insurance rates across the state.

That the anticipated lowering of premiums hasn’t happened is the source of continuing acrimony between state officials and industry representatives. They insisted that they didn’t promise the reductions politicians promoted.

In an effort to break the impasse — or at least improve the likelihood of an eventual solution — Chief Financial Officer Alex Sink and House Speaker Marco Rubio are proposing some changes that, while not without some political risk, acknowledge realistically that homeowners must pay more for the privilege of living in a high-risk state.

Ms. Sink, a former banker and the only Democrat in statewide elected office, and Mr. Rubio, the conservative Republican speaker of the House, are each pushing plans that would mean modest increases for some homeowners.

But, if approved, they would reduce Floridians’ collective financial exposure when another major hurricane strikes, causing multibillions of dollars in damages.

Last year’s law increased the “Cat” fund from $16 billion to $28 billion. Even with that 75-percent jump in the state-subsidized pool, one killer storm could easily drain the fund.

Ms. Sink suggests shrinking the fund by about $3 billion by requiring insurance companies to buy more private reinsurance instead of from the state-subsidized pool. Reducing the fund reduces taxpayers’ exposure in the event of a disaster, which would mean Floridians would have to pay less in assessments to cover Cat-fund payouts.

Industry representatives last week said such a move would result in higher premiums, but Ms. Sink’s office said they would be only 1.5 to 3.2 percent, the St. Petersburg Times reported.

Mr. Rubio, who met with the CFO last week and has praised her plan, has his own insurance-related proposal that also has merit in several respects.

He wants to require that homeowners insured by state-backed Citizens Property Insurance Corp. be required to harden their homes in order to maintain their policies.

“Basically if people can afford to, you make them do it,” the House speaker told the Palm Beach Post. “If they can’t afford it, you give them a low-interest or a no-interest loan. And if they can’t pay back the loan because they’re so poor, then in some cases we’re better off paying for this mitigation than funding or subsidizing Citizens in the long run.”

Neither proposal is a panacea. But both are steps toward coming to grips with an insurance crisis that state and industry officials agree only grows worse as the odds increase of an eventual major strike on the Sunshine State.