CFO Sink Unveils Proposal to Reform Florida’s Cat Fund
CONTACT: Tara Klimek or Nina Banister
CFO’s proposal will allow Cabinet to reduce the potential for future assessments and better safeguard the state’s financial risk
TALLAHASSEE – Holding up a stack of property, auto and other insurance bills full of assessments, Florida Chief Financial Officer Alex Sink unveiled her proposal today to reform the Florida Hurricane Catastrophe Fund (Cat Fund), which could reduce the potential for future Cat Fund assessments on Florida’s insurance consumers.
CFO Sink’s proposal would give the Governor and Florida Cabinet the ability to set both the reinsurance levels and pricing of the Cat Fund’s optional coverages, giving greater flexibility and accountability to the management of Florida’s reinsurance fund. This move would also promote increased competition in the private insurance market.
“I hear all the time from Floridians who are wondering why they have to pay these taxes on their insurance polices,” said CFO Sink, who oversees the Department of Financial Services. “If we want to reduce the potential for future assessments, we need to reform the Hurricane Catastrophe Fund to allow us to be more nimble and respond to the volatile financial and insurance markets.”
CFO Sink is preparing legislation and will urge legislative leaders to implement the proposal during the upcoming special session. Additionally, CFO Sink announced that she will present her proposal at the Florida Cabinet meeting on October 16, 2007.
If approved by the Legislature before the end of the month, the reformed Cat Fund will begin evaluating financial and insurance market conditions and will recommend to the Governor and Cabinet the level and pricing of Cat Fund optional coverages for the 2008 Hurricane Season. The Florida Cabinet would make a final decision on by February 15, 2008, well in advance of the time when a majority of private insurers would negotiate their private reinsurance contracts. While CFO Sink’s proposal will change the operation of Florida’s Cat Fund, the structure and mandatory coverages created by the Legislature will not change.
“We talk a lot about taxes, but we don’t talk much about the potential for assessments,” said Florida’s Insurance Consumer Advocate, General Bob Milligan. “Floridians are facing these taxes every day, and CFO Sink’s proposal will allow us to better manage the state’s Cat Fund to benefit Florida’s consumers and promote certainty and stability in Florida’s insurance market.”
In January 2007, the Florida Legislature created and provided for the pricing of an additional $12 billion in optional reinsurance coverage available through Florida’s CAT Fund in an effort to achieve rate relief for Florida’s insurance consumers. Not only is the expected rate relief not being realized, but Floridians have taken on substantially more risk for future assessments from the CAT Fund.
As a statewide elected officer of the Florida Cabinet, Chief Financial Officer Alex Sink oversees the Department of Financial Services, a multi-division state agency responsible for management of state funds and unclaimed property, assisting consumers who request information and help related to financial services, and investigating financial fraud. CFO Sink also serves as the State Fire Marshal.