St. Pete Times: Mike Colodny–‘We have to have real reinsurance that’s going to deliver’
Dec 15, 2008
Insurer wants $14-million refund from state catastrophe fund
St. Petersburg Times, 12/12/2008
TALLAHASSEE A property insurance company wants a refund from the state’s hurricane catastrophe fund, saying the state charged for backstop insurance it didn’t have the reserves to provide.
Although Tower Hill Insurance Group never needed the state’s help to pay claims because no storms hit Florida, the company says the state overcharged for the amount of backup insurance it was really offering.
In October, state catastrophe fund officials revealed that the state would have been in deep financial trouble had major hurricanes hit this year. The state Cat Fund sold insurers $28-billion worth of back-stop insurance coverage, but officials said they had access only to enough money to pay half that amount.
Tower Hill’s claim highlights the ongoing financial struggle that state officials face with the nation’s weak economy. Although the state’s catastrophe fund does hold some cash, covering losses from a major storm would require borrowing money on the bond market. And with a global credit crisis, even governments cannot borrow large amounts of money.
Two years ago, the Legislature and governor increased the state’s burden to pay for hurricanes to keep premiums down. Insurers buy the state’s cheap back-stop insurance, rather than shopping on the global market, and pass on the savings to homeowners. Tower Hill has filed an appeal to the state catastrophe fund, asking for about half its money back, or $14-million of the $30-million in premiums it paid into the catastrophe fund. ‘We’re happy to pay for coverage that we receive, but in this case, the coverage wasn’t there,’ said Tower Hill lobbyist Tim Meenan of Blank & Meenan in Tallahassee. Meenan acknowledged that had the world markets not collapsed, Tower Hill wouldn’t have challenged the catastrophe fund. The catastrophe fund has $9.2-billion in cash and borrowing capacity, and could have reimbursed insurers for some hurricane damage this year.
Also, state law gives the Cat Fund an out. If the catastrophe fund exhausts all available resources and doesn’t have the ability to borrow money, it doesn’t have to reimburse insurers that must pay claims.
Tower Hill insures about 155,000 policies statewide and accounts for about 5 percent of the private market in Florida, in terms of exposure, according to state insurance records. The Florida Property and Casualty Association, an insurance company group, filed a ‘petition for intervention,’ so its member insurers can benefit if state officials agree to give Tower Hill some its money back, said Mike Colodny, attorney for the group, which represents a few dozen Florida property insurers. ‘We have to have real reinsurance that’s going to deliver, because our luck is going to run out,’ said Sam Miller, spokesman for the Florida Insurance Council.
Jennifer Liberto can be reached at firstname.lastname@example.org or (850) 224-7263.