The Times-Union
Editorial
June 1, 2012
Florida is relying on luck as protection against a serious hurricane strike.
Luckily, the state hasn’t been hit by a hurricane in the last six years. But luck is no way to run a state, especially one proud of its business climate….
To read the full story, go to:
http://jacksonville.com/opinion/editorials/2012-06-01/story/relying-luck-bad-insurance-policy
Tallahassee Democrat
By Sam Miller
June 1, 2012
With hurricane season upon us, sensible consumers have been hanging hurricane shutters and putting together a hurricane preparedness kit. While these steps are important in getting ready for the 2012 Atlantic hurricane season, the financial consequences we all face in the wake of a major storm or series of storms may be far harder to recover from than the physical storm damage. This financial risk is the direct result of many elected officials’ continually ignoring recommendations from experts and failing to reform the state-run Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund.
Contrary to news reports that continue to quote individuals who believe the mention of crippling hurricane tax assessments is nothing more than a scare tactic, the proof is in the numbers, and there are some things we know for certain.
• 25/75: Citizens is far from the insurer of last resort, with approximately 25 percent of Florida’s homeowners insurance market and rates that are about 40 percent below where they need to be to cover its risk.
Citizens claims are subsidized by non-Citizens policyholders, who account for the 75 percent of Florida homeowners who have private homeowners insurance. So, 75 percent of Floridians are not only paying for their own risk but are also being taxed (assessed) to help pay past storm claims for Citizens policyholders. And, depending on the severity or frequency of storms that make landfall in Florida this year, unfortunately — and in all probability — they will be required to pay more in the future. If these hurricane taxes unnerve you, you have company. Businesses, drivers, renters and charities are also subsidizing Citizens policyholders through hurricane taxes on their policies.
• $1.5 billion or $11 billion: We know the municipal bond market is not what it used to be. Every year, various factors contribute to determining the CAT Fund’s average bonding potential, which is what the fund mainly relies on to pay its claims because it does not collect enough premiums in advance.
A recently released report compiled by the fund’s financial adviser indicated a very wide range of bonding potential from several financial services companies. While Barclays believes the fund could generate between $9 billion and $11 billion, Goldman Sachs estimates bonds will bring in between $1.5 billion and $4 billion. With the CAT Fund issuing over $17 billion in coverage for the 2012 hurricane season, the uncertainty in the bond markets is troubling. The CAT Fund, which has estimated a wide number of bonding shortfalls in three of the past four years, is being forced to sell coverage that it is not confident it can pay. Even if it can, the financial security of our state and its citizens is at risk, because any bonds will need to be paid back through hurricane tax assessments levied on all homeowner, business and automobile insurance policies.
• 8 out of 12: Eight of the 12 most costly U.S. disasters have affected Florida. Before hurricane season officially began, Tropical Storm Beryl made landfall in Jacksonville. We cannot be so ignorant to believe that Florida, the most hurricane-prone state in the U.S., will be spared continuously. This fact in and of itself is the reason that Florida should be globally diversifying its risk instead of concentrating it within our state and burdening its residents.
The facts are not scare tactics, but they are scary. There is a very real possibility that all Floridians will be on the hook annually for up to 30 years paying off hurricane tax assessments should another Hurricane Andrew or series of storms like those of 2004 and 2005 make landfall in Florida. It’s also scary that many of the officials we elect to make decisions on our behalf continually refuse to implement much-needed reform of both Citizens and the CAT Fund.
Each and every year, our state is challenged from our inherent exposure to hurricanes in conjunction with well-intentioned public policy decisions that no longer work in today’s economic environment. The Florida Insurance Council and our members are committed to working with our elected officials to help find the appropriate solutions to our state’s problems. That reform is long overdue.
Sam Miller is executive vice president of the Florida Insurance Council
Tampa Bay Online
Editorial
June 1, 2012
Another hurricane season begins today with the general public still very deeply on the hook to help cover insured losses if a major storm hits Florida.
The state’s Citizens Property Insurance Corporation has $6 billion in the bank but might have to pay $20 billion or more in claims in the wake of one big hurricane. The agency could probably stretch that far with money from the state’s catastrophe fund and market-rate loans, but then what? How could it afford to continue covering 1.5 million customers?…..
To read the full story, go to:
http://www2.tbo.com/news/opinion/2012/jun/01/naopino1-cyclone-of-uncertainty-threatens-entire-s-ar-410305/
Ocala StarBanner
By David Hart
May 20, 2012
The Star-Banner’s recent editorial, “The Cat Fund is not storm ready,” was an accurate assessment that incremental reforms are needed for Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund. We’ve known the Cat Fund has not been storm ready for years, yet elected leaders have failed to make necessary changes.
To secure Florida’s future, the Florida Chamber of Commerce has long-supported reforming Citizens and the Cat Fund. While lawmakers have taken steps to right-size Citizens and begin returning it back to its intended role as insurer of last resort, it continues to remain the largest property insurer in Florida. Changes to both government entities will help eliminate hurricane tax assessments that pose serious financial threats to homeowners, businesses and charitable organizations.
Important insurance reform legislation that would have helped stabilize the Cat Fund with sensible and modest increases failed earlier this year because of negative public perception. In reality, those proposed increases were so minor that they would have actually saved Floridians over time when compared to the hurricane tax assessments that Floridians may be stuck with for as long as 30 years.
It is time to accept that change is needed. The alternative is far too risky.
David Hart
Vice President,
Governmental Relations
Florida Chamber
http://www.ocala.com/article/20120530/OPINION02/120529659?p=3&tc=pg
The Daytona Beach News-Journal
By Slade O’Brien
May 30, 2012
The National Hurricane Center is prepared for the 2012 Atlantic hurricane season that starts June 1, with their list of 21 names — beginning with Alberto and Beryl (already used) and ending with William — for impending tropical cyclones. And just recently, Gov. Rick Scott held a hurricane conference for officials involved in preparation and response. Unfortunately, and by no fault of their own, it seems the only individuals unprepared for this year’s upcoming hurricane season are Florida taxpayers like you and me.
Florida’s over-regulation of the insurance market and our elected officials’ inability to reduce the financial risk associated with both Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund (known as the “cat fund”) leave all Floridians in a very precarious situation this storm season. We’re fortunate to have been storm-free for the past several years, but there’s no guarantee we will be spared from Mother Nature’s wrath this summer and fall.
Officials have regularly warned us of the cat fund’s instability. However, despite the support of Americans for Prosperity as well as other nonprofits, consumer groups, business groups and citizens throughout the state, necessary and important cat fund reform legislation sponsored by Sen. J.D. Alexander, R-Lake Wales, and Rep. Bill Hager, R-Boca Raton, didn’t pass in the recent legislative session.
Reform of the cat fund would have ensured the fund’s ability to pay its claims in full. Without this assurance there is the real potential that some insurers will not be able to pay claims, because the cat fund would be unable to borrow the funds needed. In fact, based on analytical data from 11 Florida insurance companies, if the cat fund had a shortfall of 20 percent after a storm, seven of the 11 companies would become insolvent.
The good news, if you can call it that, is if the cat fund doesn’t have a shortfall, hurricane claims will at least be paid. Under Florida’s current system, however, payment would have to be rendered through bonds, which would then be paid off by Florida taxpayers through hurricane tax assessments that could be charged annually for up to 30 years. That’s just to pay off a single storm that could occur this year. The bad news is that if the cat fund actually has a shortfall, some hurricane claims may not get paid at all. Neither situation is good for the taxpayer; in fact it is completely unacceptable for citizens and taxpayers to be put in either position.
If the cat fund reform legislation proposed by Sen. Alexander and Rep. Hager had passed this year, the ongoing risk associated with the fund would have been diminished and the modest costs passed on to ratepayers would have been reasonable — actually saving Floridians in the long run. Our elected officials simply cannot continue to require all Floridians to subsidize many of the state’s most fortunate at the expense of hardworking individuals, business owners, churches and charitable organizations.
It’s time for the Florida Legislature to address this problem and enact reforms that will reduce the size of Citizens, encourage the return of the private insurance market, and stabilize the cat fund before we are hit by a storm that creates the largest tax increase in Florida’s history and bankrupts us all. The benefits of reform far outweigh the risk of continuing to rely on good luck. Gambling with Mother Nature is not an effective solution to our state’s problem.
O’Brien, of Boca Raton, is the Florida director of Americans for Prosperity.
The Miami Herald
Letter to the Editor
By Rep. John Tobia
May 29, 2012
Re state Sen. Anitere Flores’ May 20 Other Views column, Where are our savings?: In 2002, Citizens Property Insurance Corporation was created as an insurer of last resort.
That seems to be a paradoxical statement considering there are over 1.45 million Citizens homeowners policies in force. Are there no other insurance companies able to provide these policies? Of course there are, just not at blue-light special prices.
By allowing Citizens to provide low rates, we are pricing out the private market and deterring more private capital from investing in Florida. Worst of all, Citizens has over $504 billion in exposure and only has the capacity of $12.9 billion to pay its claims. We have allowed Citizens to set rates that are not actuarially sound and continue to do nothing to fix this. Not very Republican or fiscally responsible of us.
You may be asking, How did the Legislature allow this to happen? The answer is simple.
We have allowed Citizens to form into a socialist program that could have a crippling effect on Florida’s economy and has destabilized the insurance market. It is reprehensible that some of my peers in the Legislature wave the Republican flag when it is convenient and electorally sound, but when the time comes to be a leader and put the state of Florida first, they buckle.
I implore Citizens’ new president, Tom Grady, and Chairman Carlos LaCasa not just to propose the removal of the 10-percent cap on new policies, but to take the next step and demand the removal of the cap altogether for all policies.
Citizens must be returned to its original intent as an insurer of last resort and we need to allow Citizens to set rates determined by the private market. To do anything else would be immoral, irresponsible and socialistic.
John Tobia,
State Representative,
District 31, Melbourne
http://www.miamiherald.com/2012/05/29/2817624/return-citizens-to-original-intent.html
The Gainesville Sun
Letters to the Editor
By Bill Newton
May 29, 2012
The Florida Consumer Action Network (FCAN) agrees with The Gainesville Sun’s editorial “Bad Business” (May 20).
Citizens Property Insurance Corp. has approximately 25 percent of Florida’s homeowners insurance market. If a major storm or series of storms were to hit Florida, Citizens could be forced to use all its reserves, all of the Cat Fund and then attempt to borrow the remaining balance from the open market through bonds which are paid off through hurricane tax assessments levied on all Florida consumers.
We believe Citizens should purchase more reinsurance from the private market in order to spread the risk worldwide instead of concentrating it within the state. Private reinsurance would pay claims instead of the assessment-backed Cat Fund, and would help to stabilize the property insurance market, encourage the return of private companies and alleviate the financial burden currently on the backs of all Floridians.
Bill Newton,
Executive director
Florida Consumer
Action Network
Tampa
http://www.gainesville.com/article/20120529/OPINION02/120529721/1077/opinion?p=2&tc=pg
Herald-Tribune
By Kate Spinner
May 26, 2012
Twenty years ago — the year Hurricane Andrew devastated parts of Miami-Dade County — a long hurricane lull had placated Florida. Now, again, a lull. A record six years have passed since a hurricane struck Florida.
Twenty years ago, the weather patterns were similar to those forecast for this year. And like this year, forecasters did not expect much hurricane activity.
Twenty years ago, like today, many Floridians had let their guard down…
To read the full story, go to:
http://www.heraldtribune.com/article/20120526/ARTICLE/120529661
The St. Augustine Record
By Bill Kaczor
May 25, 2012
TALLAHASSEE — Floridians often overestimate their ability to withstand a hurricane — and that puts them in potentially serious danger.
Florida State University professor Jay Baker, who has spent almost four decades questioning people about their storm experiences, said one constant over that span is that too many people believe they are safer than they are. They may think the storm won’t hit them, or that it won’t be as bad as it turns out. Some who live in flood- and surge-prone areas believe their homes are high enough and will be safe…
To read the full story, go to:
http://staugustine.com/news/2012-05-25/publics-misperceptions-another-hurricane-hazard
The Gainesville Sun
Editorial
May 20, 2012
Forget about running government like a business, consider what happens when you try to run a business like government.
The Citizens Property Insurance Corp. is a state-owned “business” that is the property insurer of last resort for 1.4 million Floridians. It essentially exists to take the risks that private insurance companies won’t take…
The reason Citizens can’t adequately cover its risk is precisely because politicians have kept rates artificially low. Should a major hurricane strike, the state, and its taxpayers, will have to bail out Citizens…
To read the full story, go to:
http://s3.amazonaws.com/sayfiereview_production/PressTicker/documents/1655/original/Gainesville%20Sun%20Editorial_Bad%20Business.pdf?1337608824
