Volume 3 Number 32
August 7, 2006

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GALLAGHER: CABINET VOTE BRINGS MUCH-NEEDED INSURANCE RELIEF TO FLORIDIANS

Tom Gallagher, Florida’s chief financial officer, applauded the decision by the Governor and Cabinet to approve reactivating the Commercial Joint Underwriting Association (JUA). The JUA will provide property insurance coverage to Florida’s business owners who have been unable to secure it from private companies. Gallagher recommended the JUA as a short-term solution last week in a letter to Governor Bush.

“Eight storms inflicting $38 billion in insured losses have created a crisis in Florida’s property insurance market, and our state’s homeowners and business owners are being held hostage as a result,” said Gallagher. “The solution I recommended and we approved today will help provide basic coverage to Florida employers who employ thousands of hardworking citizens and serve as the backbone of our economy. There are some real opportunities to provide further relief for Floridians, and fighting for homeowners remains my number one priority.”
CONTINUED

Since the hurricanes of 2004, Tom Gallagher has made several recommendations to the Cabinet and Legislature which have provided relief to Florida’s homeowners, including the elimination of the double-deductible, the creation of a simplified insurance policy checklist, and the approval of $715 million dollars in insurance rate-relief to Floridians which eliminated a 20% percent surcharge on homeowners insurance bills this summer.

Gallagher, who serves on the Cabinet, also recommended last week that a working group comprised of representatives from the Governor’s Office, Florida Senate and House of Representatives, Department of Financial Services, State Board of Administration and the Office of Insurance Regulation explore lowering the threshold of the Florida Hurricane Catastrophe (CAT) Fund from $5.2 billion to $3 billion. The Catastrophe Fund provides reinsurance to insurance companies.

Gallagher said the Catastrophe Fund has proven to be a critical tool to Florida’s economy and cited in today’s Cabinet meeting that the fund saves homeowners living in a $150,000 home in Miami as much as $3,100 annually. He said that for homeowners in Hillsborough or Escambia County, the savings are as much as $500 a year.

Gallagher said these savings are possible because insurance companies pay 70 cents for every $1 of reinsurance in the worldwide market but pay less than a dime for that same coverage through our Catastrophe Fund. In addition, Gallagher said that when Florida insurers purchase reinsurance on the worldwide market, the money is gone even when no storms come. When those same insurers buy it through the Catastrophe Fund, that money stays in Florida and builds to pay future storm claims.

Gallagher said if a consensus is reached by the working group making changes to the CAT fund, then he recommends that the governor call for a special session.

“The sooner we put additional solutions in place, the sooner we will be able to stabilize insurance rates and provide desperately needed coverage to homeowners,” Gallagher said.