The Daytona Beach News-Journal
By Slade O’Brien
May 30, 2012
The National Hurricane Center is prepared for the 2012 Atlantic hurricane season that starts June 1, with their list of 21 names — beginning with Alberto and Beryl (already used) and ending with William — for impending tropical cyclones. And just recently, Gov. Rick Scott held a hurricane conference for officials involved in preparation and response. Unfortunately, and by no fault of their own, it seems the only individuals unprepared for this year’s upcoming hurricane season are Florida taxpayers like you and me.
Florida’s over-regulation of the insurance market and our elected officials’ inability to reduce the financial risk associated with both Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund (known as the “cat fund”) leave all Floridians in a very precarious situation this storm season. We’re fortunate to have been storm-free for the past several years, but there’s no guarantee we will be spared from Mother Nature’s wrath this summer and fall.
Officials have regularly warned us of the cat fund’s instability. However, despite the support of Americans for Prosperity as well as other nonprofits, consumer groups, business groups and citizens throughout the state, necessary and important cat fund reform legislation sponsored by Sen. J.D. Alexander, R-Lake Wales, and Rep. Bill Hager, R-Boca Raton, didn’t pass in the recent legislative session.
Reform of the cat fund would have ensured the fund’s ability to pay its claims in full. Without this assurance there is the real potential that some insurers will not be able to pay claims, because the cat fund would be unable to borrow the funds needed. In fact, based on analytical data from 11 Florida insurance companies, if the cat fund had a shortfall of 20 percent after a storm, seven of the 11 companies would become insolvent.
The good news, if you can call it that, is if the cat fund doesn’t have a shortfall, hurricane claims will at least be paid. Under Florida’s current system, however, payment would have to be rendered through bonds, which would then be paid off by Florida taxpayers through hurricane tax assessments that could be charged annually for up to 30 years. That’s just to pay off a single storm that could occur this year. The bad news is that if the cat fund actually has a shortfall, some hurricane claims may not get paid at all. Neither situation is good for the taxpayer; in fact it is completely unacceptable for citizens and taxpayers to be put in either position.
If the cat fund reform legislation proposed by Sen. Alexander and Rep. Hager had passed this year, the ongoing risk associated with the fund would have been diminished and the modest costs passed on to ratepayers would have been reasonable — actually saving Floridians in the long run. Our elected officials simply cannot continue to require all Floridians to subsidize many of the state’s most fortunate at the expense of hardworking individuals, business owners, churches and charitable organizations.
It’s time for the Florida Legislature to address this problem and enact reforms that will reduce the size of Citizens, encourage the return of the private insurance market, and stabilize the cat fund before we are hit by a storm that creates the largest tax increase in Florida’s history and bankrupts us all. The benefits of reform far outweigh the risk of continuing to rely on good luck. Gambling with Mother Nature is not an effective solution to our state’s problem.
O’Brien, of Boca Raton, is the Florida director of Americans for Prosperity.
