Volume 5 Number 6
February 8, 2008

CFO’s proposal could save Floridians and businesses between $3.3- $6.5 billion in assessments.

Florida Chief Financial Officer Alex Sink’s proposal to reduce the risk of billions in assessments—taxes—on Floridians and businesses was heard in the House Insurance Committee Friday. CFO Sink’s proposal would reduce Floridians’ risk in the Florida Hurricane Catastrophe Fund (Cat Fund), a state-run reinsurance program that assesses Floridians’ homes, autos and business insurance policies to make up insured losses from hurricane damage.

Florida’s Cat Fund provides low-cost reinsurance to private insurance companies writing residential policies in Florida. In an effort to reduce insurance premiums by a statewide average of 24 percent, the Cat Fund was expanded in 2007 to include an optional $12 billion coverage level, for a total exposure of $28 billion.

One year later, Floridians have not received the rate relief lawmakers expected, but consumers and businesses have taken on substantially more risk for future assessments from the Cat Fund. At the same time, private reinsurance rates have fallen substantially and the private reinsurance market has the capacity to take much of the insurance risk off the backs of Floridians.

“I hear all the time from Floridians who are wondering why they have to pay these assessments on their insurance polices,” said CFO Sink, who oversees the Department of Financial Services. “I will continue to work with the Legislature this session to reduce the cost of insurance for Floridians and businesses.”

Specifically, CFO Sink’s proposal would reduce exposure in the optional $12 billion coverage level of the Cat Fund by $3 billion. This risk reduction would result in a potential savings range of $112- $217 million in assessments each year for 30 years, or $3.3- $6.5 billion overall.

CFO Sink will continue working on her legislation with lawmakers and will urge legislative leaders to implement the proposal as early as possible during the upcoming special session. If signed into law in the early stages of the Legislative session, CFO Sink’s proposal will be able to reduce the risk of assessments for the 2008 Hurricane Season.