Volume 1 Number 23
June 7, 2004 











On August 24, 1992, while I was serving as Florida’s insurance commissioner, Hurricane Andrew hit south of Miami and became the costliest natural disaster in U.S. history.

The estimated total losses from Andrew reached nearly $30 billion, $16 billion of that amount in insured losses. If Andrew had shifted one degree to the North, slamming into downtown Miami, insured losses would have been more than $50 billion. 

In the years before Andrew, much residential and commercial development had popped up along our shorelines and in our cities and towns - on land once used for orange groves and cattle farms. Every home and every shop needed property insurance protection and each insurer was issuing new policies to keep pace with the demand. Before Andrew, Florida’s property insurance market was one of the most active and competitive in the nation. But in Andrew’s wake, companies that took in $11 billion in the previous 20 years paid out $16 billion in losses.

After Andrew, insurance companies wanted to drastically reduce the number of properties and amount of policy coverage issued in our state. Companies went bankrupt, wanted to leave the market, or simply would not write new policies in a state with high property values and the threat of hurricanes.  Approximately 936,000 policyholders were left with nowhere to turn for coverage. 

Following Andrew, decisive actions were taken to prevent an economic meltdown. We learned from Andrew and are now better prepared to meet the situation if it happens again.

In 2002, to help improve our homeowners insurance market I convinced the legislature to create Citizens Property Insurance Corporation from the merger of the state’s two residual markets for homeowners insurance. The benefits to Floridians have been meaningful. 

First – significant tax savings. Citizens was created with the guidance of state and federal expertise to be a tax-exempt organization.  Hundreds of millions of dollars that would otherwise have been paid in taxes will now be available to cover policyholder claims.  Citizens’ tax-exempt status also means billions of dollars in tax savings if bonds had to be issued to help pay claims after a catastrophic storm. 

Second – less government involved in this market. Florida previously had two separate residual property markets with separate administrations, two different headquarters and two sets of regulations and agendas.  Under Citizens, duplication of service is eliminated and dollars are being saved. 

Third -- improved customer service. Citizens issues an all-perils policy, including windstorm coverage, to its policyholders. The choice of a single policy means a policyholder has one insurance agent and one insurance adjuster for all perils and claims covered by the Citizens policy.

During the 2004 session, I successfully persuaded the legislature to improve the state's Hurricane Catastrophe Fund -- increasing the availability of homeowners insurance and improving Florida’s ability to recover financially from catastrophic hurricanes. With the passage of this legislation, several insurance carriers have already committed to writing more coverage this hurricane season.

What continues to concern me are the 800-900 new people who move here every day, leaving us vulnerable to greater catastrophic economic losses because of our larger population. Educating Florida’s citizens for hurricane preparation is an ongoing process.

We must ensure we are prepared financially, have a more efficient evacuation plan in place to get residents out quickly and safely, and establish better coordination among local, state and federal agencies in response to a disaster.

Ultimately, being prepared is the best defense against the storm.