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.