SunSentinel.com
Editorial
November 15, 2011
The newest recommendations to “shrink” the size and risk of Florida’s Catastrophe Fund comes to an old conclusion: We’re all going to pay more; the only question is whether to pay now or later.
We opt for the former, but it’s no small consideration. Right now, Florida is still mired in the aftershock of the worst economic downfall in almost a century.
Many homeowners owe more on the homes they are insuring than those very homes are worth. Struggling businesses can barely afford another bout of insurance shock.
But it must also be understood that if the state were to get socked by a powerful hurricane, or a series of less powerful ones, Florida homes and businesses would get crushed by additional insurance assessments. That’s because insurance policies in the state, by law, can be assessed extra charges to make up for depletion of the CAT fund or to cover shortfalls at Citizens Property Insurance Corp.
Floridians today, in fact, are still paying 1.3 percent of their premiums to make up for deficits from the 2005 hurricane season. And the future remains unsettled. There is no guarantee the CAT fund would be able to raise the $17 billion it would need to offer committed coverage in the wake of storm losses of that magnitude.
So, pick your poison. Pay now to limit post-storm assessments, or continue to gamble on the storm-free hurricane seasons like the past six ones.
Our view? We back studying proposals, like ones offered by Florida TaxWatch, to at least blunt potential post-storm assessments.
Certainly, there are ideas on the table worth considering. For example:
One proposal would raise premium costs by $19.25 more a year, or $95 million for all policyholders, by adjusting the industry’s deductibles.
Another would increase premium costs by $92 more a year, or $453 million total, by decreasing coverage amounts by close to one-third to $12 billion.
Reducing policy coverage by $3 billion and increasing minimum co-pays for insurers to 25 percent would add $115 more a year, or $566 million for all policyholders.
If all three proposals above are implemented, costs would rise by $173 more a year, or $850 million for all policyholders, but it would drop coverage $5 billion.
We doubt Floridians can sustain the last option, not in this economy and not amid the current housing collapse. But some variation of the first two ideas could begin the process of weaning Florida from the risk it has taken on.
We believe it’s preferable to pay something now, rather than perpetually betting on the climate and risking financially crippling insurance policy assessments on top of post-storm damage in what will remain a troubled economic landscape into the foreseeable future.
