Tampa Bay Online
By Bill Hager
April 18, 2012
Just weeks ago the Florida Legislature ended its regularly scheduled session, and while some important legislation that benefits the citizens of this great state passed, legislation to address the much-needed reform of the Florida Hurricane Catastrophe Fund failed.
Meanwhile, the countdown has begun: The start of the 2012 Atlantic hurricane season is around the corner.
Based on its own analysis, the Cat Fund would have been unable to pay its claims in three of the past four years. Even with “hurricane tax” assessments levied on the insurance policies of all Floridians, as of October 2011 the fund faced a potential $3.2 billion shortfall.
In the wake of the next major storm or storms, this shortfall has the potential to dramatically impact the state. Analytical data suggests that if the Cat Fund has a shortfall of 20 percent after a storm, a significant number of Florida insurers would be insolvent or otherwise unable to stay in business.
Working with Sen. JD Alexander, R-Lakes Wales, we sponsored House Bill 833 and Senate Bill 1372, which were based on a proposal by the Cat Fund’s chief operating officer, Jack Nicholson. Supported by consumer, taxpayer, environmental, nonprofit and business groups, the bills would have reduced the risk associated with annual “hurricane tax” assessments, which could last as long as 30 years and will be levied on all homeowner, business and automobile policyholders.
Additionally, the legislation aimed to begin the process of “right sizing” the Cat Fund to ensure the fund can fully pay its obligations in the future, and would have helped foster a more stable property insurance market that encourages strong companies to return to our state and compete for our business.
Opponents of the legislation argued HB 833 and SB 1372 would have caused rates to go up. However, in reality the bond markets have already created the rate impact, and rates may very well go up without the legislation.
As an elected official, my objective is not to create a situation that negatively affects my constituents or any other Floridian. In fact, I am simply working to correct a situation that has been wrong for many years. The Cat Fund knowingly fails to collect enough premiums in advance, subsidizing the few at the expense of the many by relying on taxpayer backed bonds to pay their claims. This is unfair. There are dire consequences associated with allowing the fund to continue along this current path.
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. Absent changes in the way these state insurers operate, the reality is that these hurricane taxes are inevitable and likely to be substantially worse than if gradual adjustments are made to the system.
At this point we are left to wait and hope we are spared for another year. Hopefully, our good luck has not run out and the Legislature will have another opportunity to rectify the situation during the 2013 session. Until then, I encourage you to continue following developments regarding the Cat Fund and to support future legislation that will make the necessary changes to protect all Floridians.
http://www2.tbo.com/news/opinion/2012/apr/18/naopino2-legislature-blew-it-on-cat-fund-ar-393582/
