Fla. Consumer Advocate Confirms Cat
Fund Reform won't Cost Homeowners
3/13/2013
R Street Institute
Analysis by actuaries from the
Florida Office of the Insurance Consumer Advocate
confirms that proposed reforms to right-size the Florida
Hurricane Catastrophe Fund would not raise rates for the
state’s homeowners, the R Street Institute noted today.
According to the estimates, given that increased
competition in the reinsurance and capital markets is
projected to reduce private reinsurance costs by 7
percent annually over the next three years, the Cat
Fund’s mandatory layer could be lowered by $1 billion a
year -- from the current $17 billion to $14 billion –
while homeowners rates would still decrease by roughly
2.8 percent annually.
R Street Florida Director Christian Cámara said the
analysis underscores the need for the Legislature to act
on Cat Fund reform during this session, in addition to
its efforts to step up the depopulation of state-run
Citizens Property Insurance Corp.
“Reforming the Cat Fund will send the message that
Florida is taking steps to stabilize the market and
ensure it has the resources to pay its claims after a
major storm,” Cámara said. “That’s what is needed to
bring private insurers back to the market and reduce the
chances that Floridians will have to face crippling
post-storm taxes after the next hurricane.”
Floridians would face about $7.19 billion in
post-hurricane taxes to make up the funding shortfalls
of Citizens and the Cat Fund should even a 1-in-50-year
storm hit the state, according to projections submitted
last month to the state Legislature by the Florida
Financial Services Commission. The Cat Fund's own
projections show that it would not be able to raise
enough money in the capital markets to cover its
outstanding obligations.
The Legislature is currently working on two bills
addressing meaningful Cat Fund reform: H.B. 1107,
sponsored by Rep. Bill Hager, R-Boca Raton, and S.B.
1262, sponsored by Sen. Alan Hays, R-Umatilla.
